EURUSD Technical Analysis – New highs in Treasury yields boost the USD

Fundamental
Overview

The lack of catalysts
recently kept the US Dollar supported across the board despite the slowdown in
momentum. The market might now be looking forward to the first weeks of
November when we will get the key economic data, the FOMC decision and the US
elections.

There’s been also a good
argument that the markets are already positioning for a Trump victory and that
should translate in USD strength as it should appreciate on higher growth and
less rate cuts expectations. Nevertheless, not all markets have been in sync
with this view.

On the EUR side, the ECB
last week cut interest rates by 25 bps as expected but didn’t offer anything
new in terms of forward guidance as the central bank remains data dependent and
it’s not pre-committing to a particular rate path.

The market is pricing an 86%
chance of another 25 bps cut in December with 14% probabilities of a larger 50
bps cut. Further ahead, the market sees the ECB cutting four more times in 2025.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD extended the drop further into the 1.08 handle. The price is
now near a key swing level at 1.0777. If the price gets there, we can expect
the buyers to step in with a defined risk below the level to position for a
rally into the 1.10 handle. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish bets into the 1.06 handle
next.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the pair has been trading inside a falling channel. We are seeing a
bit of a pullback this morning and if the price reaches the top of the channel,
we can expect the sellers to lean on that trendline to position for a drop into new
lows. The buyers, on the other hand, will want to see the price breaking higher
to start targeting the 1.10 handle.

EURUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we got a quick selloff yesterday although it wasn’t triggered by any
catalysts other than some pressure from rising Treasury yields. The market is
currently erasing the drop and we might see the price getting back to the top
of the channel.

For now, we have a range
here between the 1.0810 support
and the 1.0870 resistance. The sellers will want to see the price breaking
lower to extend the drop into the 1.0777 level, while the buyers will look for
a break higher to start targeting the 1.10 handle. The red lines define the average daily range for today.

Upcoming
Catalysts

This week is pretty empty on the data front with market moving releases scheduled
for the latter part of the week. On Thursday, we get the Flash Eurozone and US
PMIs, and the US Jobless Claims figures.

This article was written by Giuseppe Dellamotta at www.forexlive.com.