EUR/USD Forecast: Another run in Treasury yields to fuel dollar’s demand

EUR/USD Current Price: 1.0796

• Higher US government bond yields are backing a dollar’s rally.
• US Fed’s Bullard said they should not rule out a 75 bps rate hike.
• EUR/USD met sellers at around 1.0815 and maintains its bearish stance.

The EUR/USD pair recovered from a daily low at 1.0777 but is having a hard time sustaining gains above the 1.0800 mark. The American dollar is in a corrective decline against its European rival, overall backed by the continued cautious mood, on the back of hawkish Fed officials and geopolitical tensions.

Meanwhile, EU leaders keep discussing potential sanctions on Moscow, although an extra embargo on oil and gas divides the bloc. Some of the Union’s countries, led by Germany, are quite dependent on Russian gas and can’t afford such a decision at the time being. At the same time, Russia has been reported to produce fewer oil barrels than those agreed with fellow producers. In total, the OPEC+ produced 1.45 million bpd below targets in March.

The American dollar soared after  St. Louis Fed President James Bullard said they should not rule out a 75 bps hike as the central bank needs to act rapidly against inflation. The currency corrected lower mid-European session, meeting sellers at around 1.0814.

The greenback is finding additional help in US government bond yields, as the 10-year Treasury note yielded as much as 2.913%, a multi-year high before shedding some ground, now trading at around the level. European stocks trade in the red, weighing on US futures and reflecting the poor market mood. Market players are also dropping stocks on the back of recession and inflation-related fears.

Data wise, Europe did not publish relevant data, while the US released March Building Permits and Housing Starts, up 0.4% and 0.3% respectively. Later in the session, a couple of  Federal Reserve speakers will hit the wires.

EUR/USD short-term technical outlook

Technically speaking the EUR/USD pair is still on a bearish path. The daily chart shows a lower low and a lower high despite the pair is currently positive, while it keeps developing far below bearish moving averages. The Momentum indicator heads firmly lower within negative levels as the RSI indicator consolidates around 36, indicating prevalent selling interest.

In the near term, and according to the 4-hour chart, EUR/USD may resume its slide. A bearish 20 SMA rejected the early advance, while the longer ones accelerate their declines above the longer one. Technical indicators, in the meantime, have pared their early advances around their midlines, and are currently resuming their declines, hinting at another leg south.

 Support levels: 1.0760 1.0720 1.0675

Resistance levels: 1.0815 1.0860 1.0920 

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