EUR/USD Forex Technical Analysis – Supported by Lower Treasury Yields Ahead of US GDP Report, Unemployment Insurance Claims

The euro is slightly higher against the US dollar on Thursday, just below the one-month high reached earlier in the week, as the minutes of the Federal Reserve’s May meeting contained few surprises, the most members of the Federal Open Market Committee (FOMC) favoring further 50 basis point rate hikes at the June and July meetings.

At 10:21 GMT, EUR/USD is trading at 1.0714, up 0.0036 or +0.33%. On Wednesday, the Invesco CurrencyShares Euro Trust (FXE) ETF settled at $98.87, down $0.49 or -0.49%.

The minutes showed the Fed is likely to stay the course for now, but is keeping its options open for a range of policy choices after the July meeting.

Eurozone government bond yields fall as anxiety eases

Eurozone government bond yields fell and spreads tightened on Thursday after policymakers at the European Central Bank (ECB) allayed fears of more aggressive-than-expected rate tightening by initiating a increase in interest rates by 50 basis points in July.

EUR/USD traders shrugged off lower yields as US Treasury yields posted a similar move overnight.

US economic reports should set the tone

Limited overnight movement in EUR/USD suggests investor indecision and looming volatility as they await the release of three key US economic reports.

On Thursday, a second estimate of US gross domestic product growth for the first quarter is due out at 12:30 GMT. If the economy is expected to contract by 1.3%, slightly better than the first estimate of -1.4%.

The number of unemployment insurance claims filed during the week ended May 21 is also expected to be released at 12:30 GMT. 217,000 Americans are expected to have applied for employment benefits, down from last week’s figure of 218,000.

April pending home sales data is set to be released at 14:00 GMT. Traders expect a decline of 1.9%, more than the previously reported 1.2%.

EUR/USD daily

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0749 will signal a resumption of the uptrend. A move to 1.0354 will alter the main downtrend.

A change in trend is not likely, but since EUR/USD is up nine sessions since its last major low, it is vulnerable to a closing price reversal top.

The short-term range is 1.0936 to 1.0354. The market is currently straddling its retracement zone between 1.0645 and 1.0714.

The main range is 1.1185 to 1.0354. Its retracement zone at 1.0770 to 1.0868 is the next major target.

The minor range is 1.0354 to 1.0749. Its 50% level at 1.0552 is a potential downside target.

Daily Swing Chart Technical Forecast

Trader reaction at 1.0714 should determine EUR/USD direction on Thursday.

Bullish scenario

A sustained move above 1.0714 will indicate the presence of buyers. The removal of 1.0749 will indicate that buying is strengthening with 1.0770 as the next target.

Expect sellers to reappear in the first test of 1.0770. Breaking above it, however, could trigger the start of an acceleration towards 1.0868, the last major resistance before the main high at 1.0936.

Bearish scenario

A sustained move below 1.0714 will signal the presence of sellers. This could lead to a test of the short term 50% level at 1.0645.

Look for buyers to defend 1.0645, but if it fails, watch for the start of a correction in the pivot at 1.0552.

Leave a Reply

%d bloggers like this: