News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • It’s important for traders to be familiar with FX spreads as they are the primary cost of trading currencies. Understand a pair's spread here: https://t.co/zEEUHZjVIG https://t.co/f6mraHu6zv
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjKWitK https://t.co/JMsJPQlQ3j
  • 🇳🇱 Consumer Confidence (SEP) Actual: -5 Previous: -6 https://www.dailyfx.com/economic-calendar#2021-09-22
  • A rough start to the week with the cryptocurrency market a sea of red with losses on either side of -10% a common sight.Get your market update from @nickcawley1 here:https://t.co/AUfuM9t7yw https://t.co/lU6HS7fHwr
  • RT @FxWestwater: Gold, Copper Forecast: XAU Eyes FOMC, Evergrande News Sends Copper Flying Link: https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2021/09/22/Gold-Copper-Forecast-XAU-Eyes-FOMC-Evergrande-News-Sends-Copper-Flying.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Westwater&utm_campaign=twr https://t.co/x2sC…
  • Heads Up:🇳🇱 Consumer Confidence (SEP) due at 04:30 GMT (15min) Previous: -6 https://www.dailyfx.com/economic-calendar#2021-09-22
  • PBoC liquidity injection + reports that Evergrande will make its next onshore bond payment ($35.88-million on 23 Sept) is bolstering risk appetite here. Yet, there is still no word on the $83.53-million offshore bond payment also due Thursday. Over to you now, Jpow & Co. https://t.co/3an0K2d5T1
  • Do you know how to properly Identify a double top formation? Double tops can enhance technical analysis when trading both forex or stocks, making the pattern highly versatile in nature. Learn more about the double top formation here: https://t.co/t9FlspUVZz https://t.co/ewdevfzq9I
  • Bank of Japan: - Outlook highly uncertain amid Covid - Asset purchase outline unchanged - Cuts assessment of production - exports, production impacted by supply side constraints - BBG
  • Heads Up:🇯🇵 BoJ Interest Rate Decision due at 03:00 GMT (15min) Previous: -0.1% https://www.dailyfx.com/economic-calendar#2021-09-22
EUR/USD Price Outlook: Euro to Struggle as US Economy Outperforms

EUR/USD Price Outlook: Euro to Struggle as US Economy Outperforms

Rich Dvorak, Analyst

EURO FORECAST: EUR/USD PRICE ACTION TO FACE HEADWINDS AMID BROAD US DOLLAR STRENGTH

Advertisement

The Euro has attempted to stabilize over recent trading sessions with EUR/USD price action catching a relief bounce off the 1.1860-level. This follows a stretch of selling pressure that sent EUR/USD tumbling roughly 500-pips off its early January swing high. Euro weakness against its US Dollar peer since the start of the year seems to largely track swings across sovereign bond yields.

EUR/USD TRACKING GERMAN BUND TO US TREASURY INTEREST RATE DIFFERENTIALS

EURUSD Price Chart Euro to US Dollar Forecast Bund to Treasury yield spread

Chart by @RichDvorakFX created using TradingView

Looking at interest rate differentials between 10-year German Bunds and US Treasuries, for example, we can see the yield spread has collapsed by a whopping 50-basis points over the last three months. EUR/USD price action generally maintains a strong positive relationship with Bund to Treasury yield spreads as illustrated on the chart above. Surging US Treasury yields has coincided with massive fiscal spending packages, and the move has been exacerbated by improving economic outlook alongside a broadly successful covid vaccine rollout.

Meanwhile, the Eurozone has been grappling with a third wave of the coronavirus pandemic amid hiccups with its own vaccine rollout. The US vaccination rate is higher than that of the EU by about 1.3-million doses per day, which puts America on pace to vaccinate 75% of its population 13-months ahead of the Eurozone according to the latest data. Along with generally less restrictions on movement and economic activity, this has improved US GDP growth prospects, and relative to the EU in particular.

Not to mention, the Federal Reserve has conveyed that it can stomach rising bond yields whereas the European Central Bank just increased its PEPP envelope to keep a lid on higher long-term interest rates. This all points to potential for the German Bund to US Treasury yield spread to continue moving lower, which could create more headwinds for EUR/USD price action going forward. This narrative might find support from the upcoming release of monthly PMI data scheduled to cross market wires later this week.

EUR/USD PRICE CHART: DAILY TIME FRAME (14 AUG 2020 TO 22 MAR 2021)

EURUSD Price Chart Euro to US Dollar Technical Forecast

EUR/USD may have found some interim support near the 1.1860-price level, but it is worth noting that technical resistance looms large overhead. The 1.2000-handle, underscored by the August 2020 swing high and February 2021 swing low, stands out as a daunting obstacle for EUR/USD bulls.

Negatively-sloped 20-day and 50-day simple moving averages also look primed to exert downward pressure on EUR/USD price action. The relative strength index has crept higher over recent trading sessions, however, and a bullish MACD crossover just formed. This could provide EUR/USD bears with an opportunity to fade Euro strength with price action likely being contained between the upper and lower Bollinger Bands.

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES