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James Hyerczyk

The Euro is trading lower against the U.S. Dollar on Wednesday despite a further inversion in the U.S. yield curve. Earlier in the session, the yield the benchmark 10-year Treasury note was lower at around 1.4593%, while the yield on the 30-year Treasury bond hit a record low at 1.9072%. The yield on the 2-year Treasury note, more sensitive to changes in Federal Reserve policy, fell to 1.5180% Wednesday morning, 6 basis points above the 10-year note’s rate.

At 11:56 GMT, the EUR/USD is trading 1.1086, down 0.0004 or -0.04%.

The moves in the Treasurys come less than 24 hours after the spread between the 10-year Treasury yield and the 2-year rate fell to negative 5 basis point, its lowest level since 2007. The phenomenon is often viewed as a recession indicator.

The 3-month Treasury bill rate also traded higher than the 30-year bond yield on Wednesday.

In economic news, German GfK Consumer Climate was 9.7, unchanged but better than the forecast. German Import Prices fell 0.2%. Private Loans came in at 3.4%, below the 3.5% forecast. Finally, the German 10-year Bond Auction showed the yield fell to -0.70% from -0.41%.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. It turned up last Friday and continued on Monday due to the excessive volatility in the market caused by an escalation of tensions between the United States and China. However, that move is starting to look like it was fueled by short-covering rather than new buying.

A trade through 1.1052 will change the main trend to down. A move through 1.1164 will signal a resumption of the uptrend.

The minor range is 1.1052 to 1.1164. The EUR/USD is currently trading on the weak side of its retracement zone at 1.1108 to 1.1095.

The short-term range is 1.1250 to 1.1052. Its retracement zone at 1.1151 to 1.1174 is resistance. This zone stopped the rally earlier in the week at 1.1164.


Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 1.1086, the direction of the EUR/USD is likely to be determined by trader reaction to the minor Fib level at 1.1095.

Bearish Scenario

A sustained move under 1.1095 will indicate the presence of sellers. If the downside momentum continues then look for the selling to possibly extend into the main bottom at 1.1052. If it fails then look for a potential acceleration into the next main bottom at 1.1027.

Bullish Scenario

A sustained move over 1.1095 will signal the return of buyers. This is followed by the short-term 50% level at 1.1108. This is a potential trigger point for an acceleration to the upside with the next targets the short-term 50% level at 1.1151 and the main top at 1.1164.

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