EUR/USD Analysis: Currency Pair Gains Amid Dovish Fed Remarks and Fluctuating Bond Yields
The EUR/USD currency pair continues its positive trajectory for a second day, positioning near 1.0610 during Wednesday’s early Asian session. This uptick can be attributed to the weakening US Dollar (USD), influenced by a series of dovish comments from Federal Reserve officials.
Several Fed policymakers have shared concerns about high long-term US bond yields impacting the board’s potential decisions on interest rate hikes. Raphael Bostic of the Atlanta Fed stated that the prevailing monetary policy remains sufficiently restrictive, negating the need for more rate hikes. This sentiment mirrors the earlier views expressed by Neel Kashkari of the Minneapolis Fed.
The US Dollar Index (DXY) has been receding, hovering around 105.70, further extending its previous week’s losses. Despite a slight uptick in US Treasury yields on Tuesday, the 10-year US Treasury bond yield currently rests at 4.64%.
Market watchers remain attentive to forthcoming economic releases, especially inflation-centric data like Wednesday’s Producer Price Index (PPI) and Thursday’s FOMC minutes and Consumer Price Index (CPI) announcements.
Conversely, a surge in German bond yields might curtail the EUR/USD’s progress. There’s anticipation in the market that the European Central Bank (ECB) might put its tightening cycle on hold.
EUR/USD Technical Perspective
The EUR/USD has touched the primary bearish channel’s top threshold. Even though overbought indicators via the stochastic hint at a potential return to the prevailing bearish trend, the EMA50 underpins the currency pair. This suggests the possibility of overcoming the current resistance, marking a bullish correction in near-term trading.
Given the contrasting technical indicators, it’s prudent to wait for more definitive trend cues. Surpassing 1.0625 could propel the currency pair into a bullish trajectory aiming first at 1.0760. However, dipping below 1.0555 could signal a downtrend with 1.0450 and 1.0400 as subsequent targets. For today, the trading range is anticipated between 1.0520 (support) and 1.0700 (resistance).
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