- EUR/USD has been trying to find its feet as US bond-yields ease off their highs.
- Ongoing vaccine concerns, Sino-American tensions and US economic strength will likely push the pair down.
- Friday’s four-hour chart is showing bears are in control.
Holding the line, but only by a thread – Buyers have come to keep EUR/USD above 1.19, but this minor upside move looks like another dead-cat bounce ahead of further falls. That is a common pattern for the pair.
This stabilization has been a result of some ease in US bond markets, with returns on ten-year Treasuries dipping below 1.70% after topping 1.75% on Thursday. Concerns that inflation lifts its head despite calming words from the Federal Reserve caused jitters in global markets and supported the dollar. There is no reason why the bond sell-off cannot resume, carrying the greenback higher with it.
The dollar is also a safe-haven currency that is sought in times of trouble – and clashes between the world’s largest economies is a reason to worry. US and Chinese foreign ministers met in Alaska for the first such encounter in President Joe Biden’s era. The counterparts publically criticized the other’s human rights records and the chances of a summit seem to have dropped. While Sino-American trade continues at full force, friction may cause economic damage.
In the old continent, the European Medicines Agency gave the green light to resume using the AstraZeneca COVID-19 vaccines after a scare around blood clots. However, the debacle around the jabs – enmeshed with politics around Brexit – has undoubtedly weighed on confidence. Europe’s vaccination campaign is set to remain slow in the near future while the US is on track to reach 50% of its population by mid-May.
The EU is well behind its peers:
Source: FT
All in all, the stars are aligned in favor of the dollar and against the dollar.
EUR/USD Technical Analysis
Euro/dollar remains depressed below the 50 Simple Moving Average on the four-hour chart and is well under the 100 and 200 SMAs, while momentum is to the downside. Overall, bears have the upper hand.
Support awaits at 1.19, the daily low, followed by 1.1880, a cushion seen earlier this week. It is followed by 1.1865 and by the 2021 trough of 1.1836.
Some resistance is at the daily high of 1.1920, followed by 1.1965, which capped a recovery attempt early in the week. The tough double-top of 1.1990 is a critical resistance line.
More Fed fireworks fade, dollar strength, not so fast
