EUR/USD Daily Price Forecast – Dollar Regains Upper Hand on Higher Treasury Yields

The EURUSD pair opened for the week with common currency having the upper hand, however the pair began a slow downtrend movement as US Greenback gained positive traction helped by a rise in Treasury yields on expectations that the Federal Reserve would continue raising interest rates despite criticism from President Donald Trump. The relatively small gains in the dollar compared with jumps in longer-dated Treasury yields reflected currency traders’ concerns over Trump’s comments late last week that bemoaned the effects a strong currency. Currently, the EUR/USD pair is trading at 1.1687, having hit a high of 1.17504 yesterday. The daily chart shows the pair has charted a narrowing price range over the last 5-1/2 weeks. Consequently, the volatility as represented by the gap between the Bollinger Bands (standard deviation of +2,2 on the 20-day moving average) has dropped to 0.017, the lowest level since April 24. An extended period of low volatility is often followed by a big move in prices (bullish/bearish) and the asset develops a trend in the direction of the breakout.

EURUSD Under Pressure

The pair may turn volatile following the release of the preliminary Eurozone PMI numbers today. However, the range breakout is more likely to happen after Thursday’s ECB rate decision.  Trump took the wind from the dollar bull sails, and they haven’t really been able to replace it. However Dollar’s momentum against Euro is expected to remain bullish during today’s trading session as Greenback has strong support from treasury yields. On release front, European market will see a bout of news, with Eurozone Markit Composite PMI, Service PMI & Manufacturing PMI seeing slightly dovish forecasts, Similarly German & French PMI’s also have slightly dovish forecasts and if the data meets expectations, Euro could see continued downward movement.

When looking at chart in technical perspective, higher timeframes have the pair rejecting from recent swing points, etching in a downside channel on H4 candles while Daily candlesticks see a constraining bearish flag forming.  Prices have carved out a Triangle chart pattern, a setup typically indicative of trend continuation. In the context of the preceding drop, that carries bearish implications. From here, a daily close below support in the 1.1527-77 area would double as a break of the Triangle floor, signaling the next leg lower is at hand and exposing the next barrier in the 1.1268-1.1313 region. Alternatively, a turn above Triangle top resistance – now at 1.1766 – targets recent swing highs in the 1.1840-52 zones.