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James Hyerczyk

The Euro hit a three-month low against the U.S. Dollar on Friday as a sharp rise in U.S. Treasury yields boosted the investment appeal of the greenback. On Thursday the benchmark 10-year U.S. Treasury yield posted its biggest one-day move since November 2016. This put it in a position to challenge the August 1 yield of 2.06%

At 13:45 GMT, the EUR/USD is trading 1.1034, down 0.0016 or -0.14%.

The August 1 yield is considered a major level by traders because it occurred the day after the Fed made the first of its three rate cuts this year. Breaking out above 2.06% will indicate that investors believe the economy will continue to strengthen.

Shortly after August 1, yields plunged enough to invert the yield curve. This sent a warning to traders about the possibility of a future recession. Yesterday’s surge in Treasury yields indicates the market has officially erased the fear of a recession.


Daily Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a move through the last swing top at 1.1176. The next major downside target is the main bottom at 1.0879.

The minor trend is also down. A trade through the minor bottom at 1.0991 will reaffirm the downtrend.

The main range is 1.0879 to 1.1179. Its retracement zone at 1.1029 to 1.0994 is currently being tested. Aggressive counter-trend buyers could come in on a test of this zone because it represents value. An uptrending Gann angle passes through this zone at 1.1019, making it a valid downside target.


Daily Technical Forecast

Based on the early price action, the direction of the EUR/USD the rest of the session on Friday is likely to be determined by trader reaction to the downtrending Gann angle at 1.1039 and the 50% level at 1.1029.

Bearish Scenario

A sustained move under 1.1029 will indicate the selling pressure is getting stronger. The first target is an uptrending Gann angle at 1.1019. The selling could stall on the first test of this angle, but if it fails then look for the selling to possible extend into the Fibonacci level at 1.0994.

Bullish Scenario

Holding above 1.1029 will be the first indication of buyers, but taking out the downtrending Gann angle 1.1039 will signal that the buying is becoming greater than the selling at current price levels. If this generates enough upside momentum, the EUR/USD could turn higher for the session.

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