- The EUR/USD is trading at the lowest levels since March 1st after falling for four consecutive days.
- Higher US bond yields are the primary driver, but euro-zone figures are not helpful.
- The technical picture is decidedly bearish with negative momentum.
The EUR/USD is trading around $1.2190, the lowest level since it hit a low of $1.2155 on March 1st. The main theme in financial markets is the rise of US yields. 10-Year Treasuries, the global benchmark, are near 3%. Yields reached 2.9957% on Monday, just shy of the closely watched figure. Despite a small retreat from the highs, the US Dollar continues rising.
Higher bond yields are a result of confidence and optimism by the Federal Reserve regarding the US economy and reaching the inflation target. The US also enjoyed better-than-expected economic figures: Existing Home Sales and Markit’s Flash PMI data all came out ahead of early predictions.
The pair is also pressured by the euro side. The latest blow to the common currency came from the disappointing German IFO Business Climate. The No. 1 Think-Tank in the No. 1 economy in the old continent reported a score of 102.1 points, below 102.7 expected for April. The score for March was 103.3. Note that IFO changed its formula and revised all the previous data. The new methodology now includes the services sector.
The downtrend in the IFO survey contrasts the Flash PMI data released earlier this week, showing some stabilization. And, in the grander scheme of things, the euro-zone is still growing. Nevertheless, any sign of a slowdown weighs on the euro.
Later today, the US publishes New Home Sales, which are projected to pick up from 618,000 to 625,000 annualized. The Conference Board’s Consumer Confidence measure carries expectations for a slight slip to 126 in April from 127.7 in March.
EUR/USD Technical Analysis
The EUR/USD fell below uptrend resistance that accompanied it since March 1st. It is trading well below the 50-day Moving Average, and most importantly, the RSI is now leaning heavily to the downside, but still not in oversold territory. All these indicators imply further falls.
The $1.2155 is a critical level of support. Below this line, the pair falls back to levels seen only in the wake of the year. Below, $1.2090 was the peak in 2017 and works as support before the all-important $1.2000 level.
Looking up, the April low of $1.2210 is the immediate level of resistance. It is followed by the round number of $1.2300 that supported it in mid-April, followed by the 50-day MA at $1.2330.
More: EUR/USD path of least resistance remains to the downside — Confluence Detector
