Euro gains fizzle at 1.19

The euro is in calm waters in the Wednesday session. Currently, EUR/USD is trading at 1.1899, down 0.11% on the day. This follows stronger movement over the first two days of the trading week.

Markets eye ECB meeting

The euro has reversed directions on Wednesday, as the mini-rally a day earlier, which saw the euro claw back to the 1.19 level, has run out of steam. The euro has been under sustained pressure and fell as low as 1.1842 on Monday, its lowest level since November 2020. The US dollar has looked sharp lately, galvanized by the increase in US Treasury yields.

The auction of US 10 and 30-year bonds later on Wednesday could cause stronger volatility from EUR/USD. The Federal Reserve has been rather nonchalant about higher US yields, but the ECB may be uneasy over the spillover of higher US yields, which has pushed the yields on eurobonds higher. This means higher borrowing costs at a time when economic conditions in the eurozone remain weak. The ECB hasn’t had much to say about higher yields, but that could well change on Thursday at the ECB policy meeting. If policymakers pan the rise in yields, investors could respond by selling off euros.

The US economy is showing signs of a deepening recovery, and pent-up demand has raised expectations of higher inflation in the coming months. Investors will be keeping a close eye on US inflation, which will be released on Wednesday (15:30 GMT). If inflation is higher than expected, the Fed may have to consider tapering stimulus earlier than expected.

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EUR/USD Technical

 

1.1832 is providing support. This line was under pressure early in the week, but EUR has recovered and moved up to the 1.19 line. Below, there is support at 1.1.753, which has held since mid-November 2020. If EUR/USD breaks materially below the 1.1800 line, the pair could fall into 1.16 territory

On the upside, there is resistance at 1.2052, followed by 1.2193

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.