Euro-zone weakness is finally expressed in EUR/USD

  • The EUR/USD is trading lower, yet still within a very tight range.
  • Disappointing euro-zone figures and a Federal Reserve that is keen raise rates may push the pair lower. 
  • The technical picture is slightly more bearish but further evidence is needed.

The EUR/USD is trading at around $1.2310, lower on the day and close to the bottom end of the limited trading range seen this week. The recent driver of the pair to the downside comes from US 10-Year Treasury yields. The global benchmark is on the rise, topping 2.90% and eyeing the elusive 3% level. The greenback is rising alongside yields, albeit more against commodity currencies than against majors.

Concerns about global trade are surfacing again. Despite the pleasantries exchanged last week, China and the US are still at loggerheads over tariffs. Sorghum used to feed animals, has been the center of the most recent spat as ships had to turn back because of duties. Metals such as aluminum and nickel have been on a tear following not only the tariffs but also as a result of sanctions on Russia. Further trade issues may weigh on the US Dollar.

Earlier in the week, euro-zone inflation was downgraded to 1.3% and the German ZEW Economic Sentiment plunged to negative territory at -8.2 points. These joined other worrying signs about the euro-zone. In the US, data has been somewhat upbeat. The pair is finally beginning to reflect this change, but the ranges are limited.

Jens Weidmann, the President of the German Bundesbank, will speak later on. He has been optimistic and hawkish. If he also acknowledges the weakness, the euro cold react. He speaks at 11:30 GMT in Washington. Euro-zone Consumer Confidence is published.

At 15:15 GMT, the nominee for the President of the New York Fed, will speak in California and may continue talking positively about the economy, repeating his message from earlier this week.

EUR/USD Technical Analysis – slightly lower

EURUSD technical analysis April 20 2018

The EUR/USD is trading in a narrowing wedge as seen by the thick black lines on the chart. At the moment, the pair is just below the middle of the range. The RSI is reasonably balanced around 50 and Momentum is non-existent. However, the pair dipped below the 50-day Simple Moving Average, a bearish sign.

Support awaits at the round number of $1.2300 which provided support to the pair last week. The late March low of $1.2240 and the early April trough of $1.2210 are next.

On the topside, $1.2340 is the 50-day SMA. Further above, $1.2413 was the high of the week. The late March high of $1.2480 is looming high overhead.

More: EURUSD Analysis: Bulls restricted by resistance cluster

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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