EUR/USD Mid-Session Update for May 19, 2022

The Euro is trading higher against the U.S. Dollar on Thursday as investors priced in the chance of an aggressive near-term tightening path by the European Central Bank (ECB), while safe-haven buying of U.S. Treasury bonds drove down yields, making the greenback a less-attractive asset.

At 13:13 GMT, the EUR/USD is trading 1.0554, up 0.0093 or +0.89%. On Wednesday, the Invesco CurrencyShares Euro Trust settled at $96.89, down $0.74 or -0.76%.

ECB Rate Hike Expectations

Over in Europe, money market traders are pricing in around 105 basis points (bps) of ECB rate hikes from around 95 bps on Tuesday before ECB official Klaas Knot signaled a 50-basis point rate increase was possible in July.

Euro Gets Boost from Drop in US Benchmark Yields

Helping to make the Euro a more appealing investment was a drop in U.S. Treasury yields on Thursday, as investors continued to seek shelter in bonds from a steep sell-off in equities.

The yield on the benchmark 10-year Treasury note fell 11 basis points to 2.778% at 13:00 GMT. The yield on the 30-year Treasury bond moved 9 basis points lower to 2.983%.

The move in bond yields comes as stock futures pointed to another downbeat session on Wall Street.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.0642 will change the main trend to up. A move through 1.0354 will signal a resumption of the downtrend.

The minor range is 1.0642 to 1.0354. The EUR/USD is currently trading on the strong side of its pivot at 1.0354, making it support.

The short-term range is 1.0936 to 1.0354. Its retracement zone at 1.0645 to 1.0714 is the next upside target. This is followed by the main retracement zone resistance at 1.0770 to 1.0868.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at 1.0498 will determine the direction of the EUR/USD on Thursday.

Bullish Scenario

A sustained move over 1.0498 will indicate the presence of buyers. Taking out yesterday’s high at 1.0564 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the 1.0642 – 1.0645 resistance cluster the next target.

Bearish Scenario

A sustained move under 1.0498 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the pivot at 1.0459.

Buyers could come in on the first test of 1.0459, but if it fails then look for the selling to possibly extend into 1.0354 – 1.0339.