EUR/USD Forex Technical Analysis – Supported by Weaker Treasury Yields Ahead of US GDP Report, Jobless Claims

The Euro is edging higher against the U.S. Dollar on Thursday, hovering just below the one-month high reached earlier in the week, as minutes from the Federal Reserve’s May meeting contained few surprises, with most Federal Open Market Committee (FOMC) members favoring additional 50 basis point rate hikes at the June and July meetings.

At 10:21 GMT, the EUR/USD is trading 1.0714, up 0.0036 or +0.33%. On Wednesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $98.87, down $0.49 or -0.49%.

The minutes showed the Fed is likely to stay the course for now, but keep its options open for a range of policy choices after the July meeting.

Euro Zone Government Bond Yields Fall as Tightening Anxiety Eases

Euro Zone government bond yields fell and spreads tightened on Thursday after European Central Bank (ECB) policymakers soothed fears of more aggressive rate tightening than expected, starting a 50-basis-point interest rate increase in July.

EUR/USD traders shrugged off the dip in yields as U.S. Treasury yields posted a similar move overnight.

US Economic Reports Expected to Set Tone

The limited overnight movement in the EUR/USD suggests investor indecision and impending volatility as they await the release of three key U.S. economic reports.

On Thursday, a second estimate of U.S. gross domestic product growth for the first quarter is due out at 12:30 GMT. If is expected to show the economy contracted by 1.3%, slightly better than the first estimate of -1.4%.

The number of jobless claims filed during the week ended May 21 is also set to come out at 12:30 GMT. It is expected to show that 217K Americans filed for job benefits, down from last week’s 218K figure.

April’s pending home sales data is slated for release at 14:00 GMT. Traders are looking for a 1.9% decline, more than the previously reported 1.2%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0749 will signal a resumption of the uptrend. A move through 1.0354 will change the main trend to down.

A change in trend is not likely, but since the EUR/USD is up nine sessions from its last main bottom, it is vulnerable to a closing price reversal top.

The short-term range is 1.0936 to 1.0354. The market is currently straddling its retracement zone at 1.0645 to 1.0714.

The main range is 1.1185 to 1.0354. Its retracement zone at 1.0770 to 1.0868 is the next major target.

The minor range is 1.0354 to 1.0749. Its 50% level at 1.0552 is a potential downside target.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0714 is likely to determine the direction of the EUR/USD on Thursday.

Bullish Scenario

A sustained move over 1.0714 will indicate the presence of buyers. Taking out 1.0749 will indicate the buying is getting stronger with 1.0770 the next target.

Look for sellers to re-emerge on the first test of 1.0770. Overtaking it, however, could trigger the start of an acceleration into 1.0868, the last major resistance before the 1.0936 main top.

Bearish Scenario

A sustained move under 1.0714 will signal the presence of sellers. This could lead to a test of the short-term 50% level at 1.0645.

Look for buyers to defend 1.0645, but if it fails then watch for the start of a correction into the pivot at 1.0552.