EUR/USD Price Forecast – Range Bound Action With Bearish Bias To Continue Across The Day

Declining German bond yields and strong USD resulted in dovish price action as the trading session opened for the day.
Colin First

EURUSD pair on Friday opened on a neutral note and traded range bound during Asian and early European session but saw sharp declines as the trading session came to an end for the week. Having achieved a bearish breakout early last week, the US Dollar has managed to retain its upper hand against the Euro and other major global currencies and continues to trade positively in the broad market. While positive greenback adds bearish influence to price action, disappointing macro data from Germany and dovish outlook in ECB’s economic bulletin influenced further downside action as investors concerns of a slowdown in Euro area economic activity continues to worsen with each passing day.

Declining Government Bond Yields Adds Bearish Influence to EURO

A decline in German long term bond yields is also adding bearish fundamental support to EURO as economic bulletin and ECB’s reduction of German growth forecast for 2019 caused investors to shun the common currency across the broad market. German bond yields continue to decline and spread difference between German bond yields and other major global bond yields are widening rapidly which is a bad sign for EURO’s long term outlook from a fundamental perspective. As explained in the monthly forecast article published earlier this month, current price action clearly shows EURO has entered into the path that leads to sharp declines. Further, the weekend saw headlines hit market that another round of China –U.S. trade talks are to be held this week which is set to focus on resolving issues relating to intellectual property rights.

A positive outcome of during the upcoming talks will improve investors risk appetite and help boost EURO in short term but trade talks need to end with a trade deal by end of this month for any semblance of hope for Euro’s recovery. The pair has taken a steady downside price action since trading session opened for the day and as of writing this article, EURUSD pair is trading at 1.1325 down by 0.03% on the day. For now, the dovish outlook of US Fed rate hike plans for 2019 continues to prevent sharp downside action. However, given the positive performance of USD in recent past and macro data updates from the U.S.A. if US Fed members provide forward guidance during the upcoming monthly session, the pair is likely to see further declines. Given lack of high impact data from U.S.A. and Europe during today’s trading hours, the pair is likely to move range bound across the day with price action influenced by broad based US Dollar price dynamics.

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