The Euro is edging higher against the U.S. Dollar after clawing back earlier losses. Yields are under pressure again on Wednesday due to concerns over a weakening global economy, however, the drop in U.S. Treasury and German bund yields seem to be having little, or even an offsetting impact on the relationship between the Euro and the U.S. Dollar.
At 13:38 GMT, the EUR/USD is trading 1.1293, up 0.0007 or +0.06%.
The catalyst behind the price action are worries over slower global growth and increasing expectations of easing monetary policy by the major central banks.
In the United States, the yield on the benchmark 10-year Treasury note fell to its lowest level since November 2016 on expectations of more stimulus from the major central banks, particularly the European Central Bank and the U.S. Federal Reserve. The German bund yield also hit an historical low.
In other news, the European Council nominated Christine Lagarde to head the ECB. Many investors read the choice of Legarde as a signal that Euro Zone rates will remain low for the foreseeable future as the central bank tries to generate inflation and GDP growth in the area.
In the U.S., President Trump announced on Tuesday the names of two nominees to fill vacant posts on the Federal Reserve Board. Trump’s nominees, if appointed and approved, will support his view for lower interest rates.
The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top at 1.1413 on June 25.
A trade through 1.1413 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 1.1181 will change the main trend to down.
The major retracement zone at 1.1318 to 1.1278 is currently being tested. This zone is controlling the longer-term direction of the EUR/USD.
The short-term retracement zone at 1.1260 to 1.1224 is the primary downside target. This zone represents value so a pullback into this zone will likely attract buyers since the main trend is up. Today’s earlier low stopped at 1.1269.
Based on the earlier price action and the current price at 1.1293, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the main 50% level at 1.1278.
A sustained move over 1.1278 will indicate the presence of buyers. This could drive the EUR/USD into 1.1318 and 1.1341.
A sustained move under 1.1278 will signal the presence of sellers. This could lead to a retest of today’s intraday low and the next support zone at 1.1260 to 1.1224.
Trading volume could dry up throughout the session ahead of Thursday’s U.S. bank holiday and Friday’s release of the U.S. Non-Farm Payrolls report.
This article was originally posted on FX Empire
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