The EUR/USD in Falling on US Yields

EUR/USD Analysis 7 October 2018

EUR/USD Spot Price: 1.1519

Support - 1.1500, 1.1460, 1.1400

Resistance - 1.1580, 1.1738, 1.1800

Trade Ideas - The EUR/USD is Falling

  • Position: Short
  • Entry Point: 1.1650
  • Stop Loss: 1.1750
  • Take Profit: 1.1500

I want to get short at 1.1650 with a stop loss at 1.1750 and a profit target of 1.1500. The same sort of idea as last week, as we look for a bounce.

2018-10-07-eurusd-trade-ideas

EUR/USD 240 min Chart - EUR/USD is Falling

Yields in Focus

The EUR/USD has really fallen away sharply in the last week. The story of the past few sessions has clearly been about the changing nature of interest rates in the US.

The yield on the US 10 year note has been spiking higher, to levels not seen in many years. We closed on Friday with a yield of 3.24%, after price broke out through resistance earlier in the week.

Yields on bonds trade inversely to price. So when we see yields moving higher, it means that traders are selling bonds. That indicates to us that there is a changing sentiment in the air.

We are already seeing the FOMC raise rates with a hike in September and another one the way for December. Clearly, bond traders are telling the market that the US economy is recovering.

At this stage, it means that Europe is clearly lagging and that will continue to put downward pressure on the EUR//USD as money flows into the Greenback.

Key Economic Data

This week we have the ECB minutes due for release. Clearly it is the biggest event of note for the EUR/USD, however, the ECB has not been giving much away in recent times. They don’t appear to be looking to raise rates anytime soon and that will keep the pressure on the EUR/USD to the downside.

US CPI is also due for release and it is probably the biggest market mover this week. A strong result, above the 0.2% MoM predicted, will see plenty of buying interest in the USD.

Technical Levels

The EUR/USD has failed at the 1.1800 resistance level and it is that major high that I think will hold us down for an extended period.

As we continue to push to the downside, the 1.1300 swing low is the only thing holding price up at the moment. If that breaks then I suspect we will see a very sharp sell-off.

2018-10-07-eurusd-key-levels

EUR/USD - Key Levels

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