- The US Dollar fails to benefit from upbeat US data and higher Treasury yields.
- The Euro outperforms as European yields also rise.
- The EUR/USD pair trades near the 1.0600 area, maintaining a bullish bias.
The EUR/USD pair rose on Tuesday, disregarding positive US data and higher Treasury yields. The pair reached a high of 1.0595 before pulling back and trimming its gains.
The ZEW survey showed positive signs in the region, with the Eurozone Sentiment Index improving in October to 2.3 from -8.9, surpassing market expectations. The German ZEW also recovered from -11.4 to -1.1, beating the market consensus of -9. Next week, the European Central Bank (ECB) will have its monetary policy meetings, and it is expected to keep rates unchanged for the first time since June 2022.
On Tuesday, upbeat US economic data included Retail Sales (up 0.7% in September versus an expected 0.3%) and Industrial Production (0.3% versus 0%). The US Dollar received a brief boost from this data but quickly lost momentum. The EUR/USD dropped to 1.0540 but then reversed its course to the upside.
Both US and European bond yields rose sharply. The 10-year US yield jumped 2.60% to 4.86%, while the German equivalent rose from 3.40% to 2.88%. The bond market continues to experience significant fluctuations. If Eurozone yields follow Treasury yields, the impact could be offset, as seen on Tuesday. However, robust US data is likely to limit the upside in the EUR/USD pair. On Wednesday, US Housing Starts, Building Permits, and the Fed's Beige Book are due.
EUR/USD short-term technical outlook
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The EUR/USD has risen above the 20-day Simple Moving Average (SMA), which is still showing a negative slope. The Momentum indicator has risen above 100, indicating a positive signal for the Euro. However, the primary trend remains downwards.
On the 4-hour chart, the price is well supported and holding above several key SMAs, with technical indicators favoring the upside. The immediate resistance level is around 1.0600, and a break above that would draw attention to 1.0630. A daily close above the latter level would pave the way for further gains. On the flip side, a decline below 1.0540 should weaken the outlook for the Euro, exposing 1.0500.
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