EUR/USD was offered at the confluence of 5-DMA and 10-DMA on Monday after the German elections revealed a sharp rise in support for the far-right AfD party. Merkel's weak victory and heightened tensions in the Korean Peninsula did not help the matters either.
The spot dropped to an intraday low of 1.1832 and closed at 1.1848 [head and shoulders neckline level]. The minor recovery from the intraday low could be attributed to the fact that Fed policymakers stand divided on the outlook for inflation and interest rates.
Both New York Federal Reserve Bank President William Dudley and Chicago Fed President Charles Evans said they believe the US economy's fundamentals are sound, and both said they support gradual rate hikes ahead. Dudley reinforced Fed Chair Janet Yellen's confident tone, while Evans sounded much less certain.
Focus on ECB's Praet and Fed's Yellen & Co.
- ECB Chief Economist Peter Praet chairing Jean Monnet Lecture, “Good Pension Design” at Second ECB Annual Research Conference organized by the ECB in Frankfurt, Germany - 1200 GMT.
- Federal Reserve Bank of Cleveland President Loretta Mester moderates a “global outlook” panel at the 59th National Association for Business Economics annual meeting, which will debate collective challenges under the theme “Prospects for Growth: Reassessing the Fundamentals” – 1330 GMT.
- Federal Reserve Board Governor Lael Brainard speaks on “Labor Market Disparities” before the Federal Reserve Board Conference, “Disparities in the Labor Market: What are we Missing?” -1430 GMT
- Federal Reserve Chair Janet Yellen speaks at a luncheon before the National Association for Business Economics 59th Annual Meeting, themed “Prospects for Growth: Reassessing the Fundamentals” – 1645 GMT
ECB's Praet is likely to reiterate that " Substantial monetary stimulus is still needed to bring inflation in the euro zone back to the European Central Bank’s target of almost 2 percent".
Meanwhile, the Fed policymakers are likely to sound like reluctant hawks. The message from Fed chair Yellen is likely to be the same as last week. At the end of the day, it is Yellen's view that matters most. The American dollar may catch another bid wave on December rate hike talk and balance sheet taper.
US-German 10-year spread
The bullish symmetrical breakout on the chart above suggests the spread could widen in favor of the US dollar.
EUR/USD Technical Levels
The spot traded around 1.1860 in Asia. The 14-day RSI has dipped below 50.00 [bearish]. This, coupled with a drop below the head and shoulders neckline support of 1.1848 would signal the pair has topped out at 1.2092 [Sep 8 high].
On the downside, the upward sloping 50-MA of 1.1832 is likely to offer support, which, if breached, shall open up downside towards 1.1689 [Aug 9 low] and 1.1662 [Aug 17 low].
On the higher side, breach of resistance at 1.1861 [Sep 20 low[ would open doors for 1.1919 [5-DMA + 10-DMA] and 1.1980 [Sep 1 high].
Daily chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD extends gains above 1.0700, focus on key US data
EUR/USD meets fresh demand and rises toward 1.0750 in the European session on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, recapturing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming intervention risks. The focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold closes below key $2,318 support, US GDP holds the key
Gold price is breathing a sigh of relief early Thursday after testing offers near $2,315 once again. Broad risk-aversion seems to be helping Gold find a floor, as traders refrain from placing any fresh directional bets on the bright metal ahead of the preliminary reading of the US first-quarter GDP due later on Thursday.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price.
US Q1 GDP Preview: Economic growth set to remain firm in, albeit easing from Q4
The United States Gross Domestic Product (GDP) is seen expanding at an annualized rate of 2.5% in Q1. The current resilience of the US economy bolsters the case for a soft landing.