EUR/USD Daily Price Forecast – EURO Gains Upper Hand on Weak US Greenback in Broad Market

Wall Street once again overshadows risk aversion coming from Europe.
Colin First
EURUSD Wednesday
EURUSD Wednesday

The EURUSD pair saw some steep decline during Tuesday’s trading session owing to Italian budget updates and influence from Deputy PM Salvini’s comments on plans to keep budget unchanged and expecting change in EU’s rules. This was further aggravated by strong US greenback in broad market owing to surge in US Treasury yields.  However EURO started to gain ground in later hours as US Greenback weakened in broad market owing to US bond yield retreating after touching new highs. Market gained further positive influence as risk sentiment returned to market despite Italian budget updates as strong positive performance in Wall Street influenced hawkish sentiment among global investors. As of writing this article, the EURUSD pair is trading at 1.1506 up 0.14% on the day.

EURO Likely to Continue Experiencing Bearish Influence Owing to Italian Budget Updates in Near Future

The dollar slipped further from seven-week highs on Wednesday although underlying support for the greenback remained strong amid a confluence of factors, including a strong U.S. economy and a steady path for rate hikes by the Federal Reserve. While U.S. Treasury yields came off their highs overnight, the probability for further spikes remain high as investors bet rising inflation pressures will keep the Fed firmly focused on tighter policy, even as U.S. President Donald Trump took aim at policy makers’ hawkish inclinations. The single currency slipped overnight to a seven-week low of 1.1432 after yields on Italy’s 10-year paper hit a 4-1/2 year high, despite comments from Italian Economy Minister Giovanni Tria stating that Italy will do whatever is necessary to restore calm if market turbulence turns into a financial crisis as Deputy PM Salvini had commented earlier that government won’t backtrack on the budget even if local yields keep soaring.

When looking from technical perspective, the pair created a big long-tailed doji candle yesterday, indicating the sell-off from the Sept. 24 high of 1.1815 has likely run its course. A bullish reversal would be confirmed if the spot closes today above the doji candle’s high of 1.1503. The hourly chart is showing that the pair has cleared the descending trend line and is trading above the 50-hour and 100-hour exponential moving averages (MAs). The relative strength index (RSI) of 55 is biased toward the bulls. The 4-hour chart is reporting a bullish divergence of the RSI. The common currency is likely to post a positive follow-through to yesterday’s long-legged doji candle to confirm a bullish reversal. However the prospects of a bear-to-bull trend change would drop if the Italian bond yields spikes in European market hours.

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