The EUR/USD erased the gains made yesterday as the US dollar staged a major comeback. The EURUSD price dropped to 1.2138, which is 0.85% below yesterday’s high of 1.2243.
What happened: The US dollar has been under pressure of late as investors focus on the rising Treasury yields. They assume that the upcoming $1.9 trillion stimulus package will overheat the economy and push the Fed to hike rates earlier than expected.
The EUR/USD dropped yesterday after the relatively strong US initial jobless claims data. According to the Bureau of Labour Statistics, more than 730k people filed for initial claims last week. That was substantially lower than the median estimate of 838k. The number of continuing claims declined from 4.52 million to 4.41 million.
Looking ahead, the pair will today react to the latest French GDP, German import price index, and the Spanish consumer price index data. Also, it will react to the important US personal spending and income numbers. Most importantly, analysts will be paying a close attention to the action in the Treasuries.
EUR/USD technical outlook
On the four-hour chart, the EURUSD price dropped sharply yesterday after going through a major bullish breakout. The pair moved below the middle line of the Bollinger Bands and is currently slightly above the 50% Fibonacci retracement level. It is also slightly above the ascending green trendline.
Therefore, the pair will remain in a bullish trend so long as it is above this trendline. If it drops below the line, however, it will signal that bears have prevailed, which will see them target the 38.2% retracement at 1.2100.
EURUSD technical chart