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James Hyerczyk

The Euro fell to its lowest level since December 21, down about 2% from a high of 1.2349 last week as widening U.S. Treasury yields and expectations of more fiscal stimulus pressured it for a third consecutive day.

At 103 basis points, the spread between the three-month and 10-year U.S. debt is at its steepest since late March and is approaching the 2020 highs of 123 bps. The 10-year yield of 1.10% is the highest since March 19, while the 10-year TIPS inflation break-even inflation rate of 2.07% is the highest since November 2018.

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At 13:37 GMT, the EUR/USD is trading 1.2151, down 0.0071 or -0.58%.

One of the catalysts behind the move is President-elect Joe Biden’s promise of “trillions” in extra pandemic-relief spending now that the Democrats will be in control both houses of Congress when he takes office on January 20.

Ordinarily, the extra spending plans would force investors to worry about rising inflation and its detrimental effect on the U.S. Dollar in a weak economy, but the currency has been supported in recent weeks thanks to rising U.S. Treasury yields.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.2025 will change the main trend to down. The uptrend will resume when buyers overtake 1.2349.

The minor range is 1.2025 to 1.2349. With the EUR/USD weakening on Monday, its 50% level at 1.2187 is new resistance.

The short-term range is 1.1800 to 1.2349. Its 50% level at 1.2074 is the primary downside target.


Daily Swing Chart Technical Forecast

Look for a downside bias on Monday as long as the EUR/USD remains under 1.2187.

Bearish Scenario

A sustained move under 1.2187 will indicate the selling pressure is getting stronger. If this continues to generate enough downside momentum then look for the move to possibly extend into 1.2074.

Bullish Scenario

A sustained move over 1.1287 will signal the presence of buyers. This could trigger a rebound into a minor pivot at 1.2246. Overtaking this level will indicate the buying is getting stronger. This could lead to a retest of the multi-year high at 1.2349.

For a look at all of today’s economic events, check out our economic calendar.

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