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EURUSD Forecast As the Dollar’s Strength Is Curtailed by Falling Treasury Yields

The euro started trading on the front foot against the dollar on Monday, going for 1.0829, after rising by 0.11% at press time. The euro’s 9-day winning streak against the US dollar came to a halt on Friday, and the new week presents a flurry of new macroeconomic releases that could redefine the trend. Notably, EURUSD has a headstart resulting from falling US Treasury yields.

EURUSD’s movement on Monday will likely be impacted by speeches from high-ranking officials from the German central bank and ECB president Christine Lagarde. Germany is the Eurozone’s largest economy, and its recent macroeconomic performances have weighed down on the euro.

Two Bundesbank officials, Member of the Executive Board Dr. Sabine Mauderer and the Bank’s President Joachim Nagel will issue potentially high-impact statements during the London session. Furthermore, ECB president Christine Lagarde’s speech will useful hints as to the economic block’s monetary policy direction.

The Eurozone reported forecast-beating improved PPI figures last week. Nonetheless, ECB monetary Policy Committee members already expressed themselves on their preferred interest rate trajectory. However, today’s speeches carry more weight since they come on the heels of the first upward-looking macroeconomic printout by the economic block in a long time.

Meanwhile, the US dollar’s strength will be defined by the release on New Home Sales and Building Permits data for January.  The figure for the New Home Sales is especially important, as it is taken as a barometer of the performance of the economy. The sector recorded forecast-beating growth in December, when 664k homes were sold and analysts expect another rise to 680k.

US Treasury yields on the benchmark 5 and 10-year bonds have fallen by 3 basis points as of this writing, and this will likely put a lid on gains by the dollar. The yields rose above 4.300% on Friday, but have retreated significantly below that figure as of this writing.

Technical analysis

The 1.0835 pivot will be critical to the trajectory of the EURUSD pair, which currently shows bearishness.  The market will likely be choppy as long as the pair trades below 1.0835. If the bears continue being in control, a break below the pivot could target breaching the support at 1.0805. If they succeed in doing that, the support will likely move lower to 1.0790. Alternatively, control by the buyers above the pivot will see them target 1.0855. A break past that point could see the next resistance established at 1.0870.