Euro Stalls with the US Dollar Gaining on Higher Treasury Yields. Lower EUR/USD?

Euro, EUR/USD, US Dollar, Fed, USD/JPY, Hang Seng, China, Fibonacci – Talking Points

• Euro support wilted after US Dollar resumed strengthening today
• The Fed reminded markets of their intention and Treasury yields responded
• If EUR/USD breaks above near-term resistance, will it make a new high?

n The Euro slid lower into Tuesday with the US Dollar climbing across most currency pairs after Treasuries added a few basis points across the curve in the North American session overnight.

Some relatively hawkish comments from a couple of Fed speakers lifted yields. Federal Reserve Bank of New York President John Williams noted that policy would need ‘to be kept restrictive for some time’ and was open to further hikes if warranted.

Additionally, Federal Reserve Governor Michelle Bowman said, “I expect that additional increases will likely be needed to lower inflation to the FOMC’s goal,”

They both reiterated what other Fed speakers have stated before. That is that the rate path going forward will be dependent on the incoming economic data.

USD/JPY has been the notable mover today, establishing itself above 143.00 again. The growth-sensitive Aussie and Kiwi Dollars are also on the back foot.

Hong Kong’s Hang Seng Index (HSI) dipped after Chinese trade data increased investor anxiety around the economic outlook there.

While the trade balance for the month of July exceeded forecasts at USD 80.6 billion, both exports and imports shrunk significantly, adding to concerns for activity domestically and abroad. Other APAC equity indices have been somewhat subdued.

Crude oil has eased a touch with the WTI futures contract trading under US$ 82 bbl while the Brent contract is below US$ 85.50 bbl. Gold is steady near US$ 1,930.

Looking ahead, after German CPI US trade data will be a focus for the market. The Fed’s Harker and Barkin will also be crossing the wires.

The full economic calendar can be viewed here.

EUR/USD TECHNICAL ANALYSIS

EUR/USD has been bumping up against a descending trend line in the last few sessions but it has been unable to overcome. It may suggest that near bearishness is intact for now.

A break above that trend line might see a test of potential resistance in the 1.1075 – 1.1095 area where several historical breakpoints reside along with the 21-day simple moving average (SMA) and just ahead of the psychological level at 1.1100.

Further up, resistance could be at the breakpoint from the March 2022 high at 1.1185 or the recent peak at 1.1275, which coincides with two historical breakpoints.

Above those levels, resistance might be at the Fibonacci Extension of the move from 1.1095 to 1.0635 at 1.1380. Just above there are some more breakpoints in the 1.1385 – 95 area.

On the downside, support may lie near the recent low at 1.1010 which has the 55- and 100-day SMAs nearby.

Support could also be near the 61.8% and 78.6% Fibonacci Retracement levels at 1.0880 and 1.0770 respectively.

Between those levels, some prior lows and the breakpoint in the 10830- 1.0835 area may provide support. To learn more about Fibonacci techniques, click on the banner above.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCarthyFX on Twitter