Euro Pressured by Overnight Surge in Treasury Yields

The Euro is under pressure early Monday as the U.S. Dollar strengthened following an overnight surge in U.S. Treasury yields. The weaker Euro theme is being fueled by the divergence in monetary policies between the hawkish U.S. Federal Reserve and the dovish European Central Bank (ECB). However, this relationship could change a little at mid-week following the release of Euro Zone inflation data.

At 06:46 GMT, the EUR/USD is trading 1.0962, down 0.0023 or -0.21%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $101.88, down $0.12 or -0.12%.

Major Euro Zone economies are due to report inflation figures from Wednesday, and “stronger-than-expected Euro Zone CPI will add to rates market pricing for ECB tightening, underpinning the Euro,” Barclays analysts said.

We’re not sure how much of a positive reaction will be generated by strong CPI numbers because of the economic impact of the war in Ukraine.

Also on Friday this week is the U.S. Non-Farm Payrolls report. Analysts aren’t expecting this data to have a major effect on U.S. interest rate expectations and the U.S. Dollar, given the market is already positioned for several rate hikes this year. Aggressive Euro bulls may try to take advantage of this assessment.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0901 will change the main trend to down. A move through 1.1137 will signal a resumption of the uptrend.

The first minor range is 1.0806 to 1.1137. The EUR/USD is currently trading on the weak side of its pivot at 1.0972, making it potential resistance.

The second minor range is 1.0901 to 1.1137. Its pivot at 1.1019 is additional resistance.

The major resistance area is a pair of 50% levels at 1.1098 to 1.1151. The latter is a potential trigger point for an acceleration to the upside.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Monday is likely to be determined by trader reaction to 1.0972.

Bearish Scenario

The daily chart shows the way of least resistance is down with 1.0901 the first target.

Taking out 1.0901 will change the main trend to down. This could trigger a sharp break into the next main bottom at 1.0806. This level is a potential trigger point for an acceleration to the downside with 1.0636 the next major target.

Bullish Scenario

Overtaking 1.0972 will signal the presence of buyers. The first upside target is 1.1019.

A sustained move over 1.1019 will indicate the buying is getting stronger with 1.1098 to 1.1151 the next major target. Inside this zone is the main top at 1.1137.