EUR/USD Technical Analysis: Price Falls in Tandem with Bond Yields – 13 February 2023
The EUR/USD exchange rate moved away from its 10-month highs last week with losses extending to the 1.0670 support level.It settled around it at the start of this week’s trading, leaving the outlook hanging in the balance.It may be lucky if it is able to avoid more declines in the coming days.The price of the euro fell in tandem with the rise in US bond yields.
The adjustment of the futures for the interest rate on the US funds to indicate a move to 5% and beyond after the rise in January in the US non-farm payrolls report which seemed to undermine the possibility of an imminent halt in the Federal Reserve (Fed) cycle the interest rate.
Recently, US Federal Reserve officials have been priming markets to increase estimates and forecasts in March about how interest rates will eventually rise so they can be confident that US inflation will return to its 2% target as they make their way around the world. Last week, Chairman Jerome Powell said that as little as a quarter percent increase in the federal funds rate may be all that is needed to see inflation return, and wage growth continued to decline in the latest payrolls report.
Softening wage growth could mean that inflation could return to target even as US unemployment remains at historically low levels, which would eliminate the need for higher interest rates, although it all depends on how the members of the Federal Open Market Committee see it. The FOMC data.
While the extended US dollar rise is likely to affect all currencies, the euro can be somewhat insulated from this given the recent interest rate expectations made clear by the European Central Bank. The European Central Bank has been firm in asserting that continental interest rates will definitely rise more in March and is likely to rise again in the following months, albeit by unspecified increments. Bank Governor Christine Lagarde recently said: “We’re certainly not there now, and we won’t be in March, given that we’ll be relying on the core inflation indicators and the pressures that we’re seeing very clearly at the moment.”
She added: “What happens next, as I said earlier, will be a factor in the amount of ground we need to cover, and there will probably be ground to cover, but it will depend on the data.”
According to the performance on the daily chart below, the price of the euro currency pair against the US dollar EUR/USD is still on a downward rebound path. The current movement without support 1.0700 confirms the continuation of the bears’ control over the trend. The technical indicators will not turn towards sell saturation levels for that period without moving towards the support levels 1.0630 and 1.0520 respectively. On the other hand, the bulls will have a new wound if the currency pair moves above the 1.0830 resistance, and amid the absence of important economic releases, investor sentiment will have an impact on the currency pair’s attitudes.
I expect quiet performance today as investors await the announcement of the important US inflation figures later this week.
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