Eur/usd - page 482
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EUR/USD Retreats as US 10-Year Yields Hit 2-Month Highs
A further sell-off in bond markets was the main focus on Friday with commentary from Fed speakers hawkish enough to put further upward pressure on US yields and net losses for EUR/USD.
The Euro consolidated in narrow ranges ahead of the US open on Friday with a slight downward drift in EUR/USD after the failure to hold above 1.1300 yesterday.
In his speech on Friday, Boston Fed President Rosengren backed a gradual tightening of monetary policy given the tight labour market. He again made references to the dangers of delaying interest rate increases for too long, given the risk that interest rates would then have to rise rapidly. He also stated that the US economy may already have moved slightly beyond full employment.
Bond yields were again an important focus with further loses in Eurozone and US fixed-income markets. US 10-year yields moved to above 1.65% for the first time in over two months. Although German yields also increased with 10-year yields moving out of negative territory for the first time in seven weeks, there was net dollar support from higher US yields.
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EUR/USD marked an intraday high at 1.1285, but in the afternoon the pair erased all daily gains and dipped into negative territory.
EUR/USD forecast for the week of September 12, 2016
The EUR/USD pair initially tried to rally during the course of the week, but as you can see struggled at the 1.1350 level. Because of this, we ended up forming a shooting star and I now think that we’re going to continue to go lower, perhaps reaching down towards the 1.10 level. This is a market that more than likely will continue to see volatility, but I’m not expecting any type of massive move in this particular pair. That being said, it’s more than likely going to be a market that you can trade off of short-term charts, but might struggle on longer-term charts.
EUR/USD came under strong pressure after Fed member’s remarks yesterday, who elevated the expectations for rate hike in very short-term. The pair found support and stabilezed around 1.1200 area.
EUR/USD Weekly Forecast: Early Focus on Fed Speak
Fed comments early in the week and US data over the second half will be crucial for EUR/USD trends.
The dollar suffered two important setbacks during the week with a much weaker than expected ISM non-manufacturing report and a less dovish than expected ECB press conference.
Although EUR/USD did make net gains, the dollar was resilient at lower levels and EUR/USD again hit resistance above 1.1300 with the pair still struggling to make a breakout. The 1.1100 and 1.1350 areas will be a notable focus on the week if the pair attempts to make a sustained move.
There was a notable move in US bond markets with 10-year yields rising to two-month highs of 1.67% on Friday from 1.53% following the weak ISM data.
In global terms, there was speculation that central banks were shifting to a less aggressive monetary policy and putting pressure back on national governments to boost growth conditions.
A further increase in US bond yields would provide net dollar support, although there is an important proviso as a general deterioration in global risk appetite would tend to support the Euro given the strong current account position.
The latest German ZEW data will be released on Tuesday with an underlying sense of nervousness over the German outlook following a recent batch of notably downbeat data.
The Euro-zone final inflation data will be watched closely on Thursday, especially with the flash data below expectations. In terms of economic data, however, the main impetus will come from US releases.
Comments from ECB speakers will be monitored closely to assess whether is any attempt to put a more dovish spin on last week’s ECB press conference. In particular, there is the possibility of hints that policy will be eased further late in 2016. Federal Reserve policy will inevitably remain an important focus early in the week, especially as there have been no clear signals of intent for the September Fed meeting.
Fed speakers enter a silent period in the week ahead of FOMC meetings and there should be no public comments from Tuesday, although some form of informal media leak is possible.
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Since January 2015 we have not seen EUR/USD at 1.1415 longer than a week. So if the pair succeed to push higher and keep staying above this level, it would appear to be the clearest precedent for a strong move to and through the August high at 1.1712.