- Treasury yields rose this week on better-than-expected US data
- A recent auction in the US revealed less demand for the country’s debt.
- Data from the Eurozone showed a higher than expected increase in German inflation.
The EUR/USD forecast points south as the greenback trades near a two-week high amid rising Treasury yields. Meanwhile, the euro remains weaker as markets prepare for an ECB rate cut next week.
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The rise in US yields spooked investors, leading to a scramble for the safety of the dollar. Treasury yields rose this week on better-than-expected U.S. data, raising doubts about Fed tapering in September. At the same time, a recent auction in the US revealed less demand for the country’s debt.
Investors are now looking forward to US GDP and unemployment data. However, the focus is on the core PCE price index, due on Friday. This report will show whether inflation eases or remains stubborn. Consequently, this will significantly affect the prospects for a rate cut in the US.
Elsewhere, data from the euro zone showed a stronger-than-expected rise in German inflation of 2.8 percent in May. This was slightly higher than the 2.7% forecast and came after a 2.4% rise in the previous month. However, economists expected this jump. It therefore had little impact on expectations for an ECB rate cut next week.
A Reuters poll showed all economists expect the European Central Bank to implement its first rate cut in June. Moreover, economists expect another reduction in September and December. This is a more dovish view as markets are predicting only two cuts in 2024.
EUR/USD key events today
- US preliminary GDP q/q
- US unemployment claims
- USA pending house sales m/m
EUR/USD Technical Forecast: New low confirms bearish reversal
On the technical side, the EUR/USD price broke below the critical support level of 1.0800 after a sharp bearish move. This comes after the price broke out of its bullish channel. The initial breakout was paused as the bulls tried to regain control. However, the bears overcame them and broke below the 30-SMA and 1.0800 to make a lower low.
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This confirms the beginning of a downtrend with lower highs and lows. Furthermore, the RSI is showing solid bearish momentum as it prepares to dive into the oversold region. Given the strong bearish bias, the price is likely to decline to retest the 1.0725 support level.
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