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EUR/USD: euro takes control of debt market


On Monday the euro closed down. My forecast against Friday didn’t come off. The American dollar rose throughout the market due to the sell off on the bonds market. The euro/dollar dropped to 1.0709, with gold at $1211.65.

After the victory of president-elect Donald Trump, investors are switching funds from bonds in shares into USD, thereby negatively affecting all currencies. On Monday the yield for 10-year UK bonds rose 8.72% to 1.49%, German 10-year bonds rose 29.76% to 0.39% and American 10-year bonds rose 8.20% to 2.29%, with the 30-year bond yield rising above 3%.

The situation on the American session is stabilising. American bond yields have begun to decline and the dollar has switched into a correctional phase. The euro/dollar has restored to 1.0759.

Market expectations:

The price movements for the US bonds are the main driver for all currencies. At the time of writing this analysis, the 10 and 30-year US bond yields have fallen. The yield for 5-year bonds has rose 0.10%. The percentage swings were big, so it’s not clear what the values will be like at trade opening in Europe.

I didn’t bother with a forecast since I never forecast bond movements. I even don’t know whether technical analysis applies to them or not. But all eyes from the banks are on them. If we go off the price pattern on the hourly, everything is pointing to a further fall for the euro to 1.0693. Only, for some reason I don’t fancy selling, nor buying euro.

Day’s News (GMT+3):

  • 10:00, German preliminary GDP for Q3 of 2016;
  • 11:15, RBA’s governor to speak;
  • 12:30, UK CPI, PMI and RPI for October, plus housing market index for September;
  • 13:00, Eurozone preliminary GDP for Q3 of 2016, balance of trade in September taking seasonal fluctuations into account, economic mood index from ZEW for November, German economic mood index from ZEW for November, UK BoE report on inflation and perspective for the economy to be heard by parliament;
  • 16:30, US retail sales excluding auto sales and retail sales in October, New York Fed manufacturing index for November and import index for October.

Technical Analysis:

Intraday forecast: minimum: n/a, maximum: n/a, close: n/a.

Euro/ rate on the hourly. Source: TradingView dollar

On Monday the euro bulls didn’t manage to break from the 112-135 degree inversion zone. Due to the growth in yield for American bonds, the euro plummeted to 157 degrees at 1.0729. From here the price restored 45 degrees to 1.0789. The buyers couldn’t manage to go higher. Bond sales caused a new wave of euro sales, with money pouring into the dollar. When the yields began to fall, the dollar switched into a correctional phase.

Due to a fall in the yields, the euro has managed to correct to 1.0771 in Asia. The correction totals 45 degrees. Judging by the indicators and the price patterns, the fall of the pair is not yet finished. I think that the minimum will be updated. In any case, before taking a decision to trade, it’s worth taking a look at the movements on the US bond market and the euro/pound cross. The resistance is at 1.0787.


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