EUR/USD Current rate: 1.0917
- Fading hopes for further interest rate hikes in Japan are helping to stabilize market sentiment.
- US Treasury yields continue to recover after the recent slump.
- EUR/USD is neutral to bearish in the short term, critical support at 1.0890.
The EUR/USD pair stabilized above the 1.0900 level on Wednesday as market sentiment continues to improve. The improved sentiment partly resulted from comments by Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, whose dovish words poured cold water on Asian markets. Uchida said the BoJ would not raise interest rates if global markets remained unstable, reducing the possibility of a near-term hike. The Japanese yen (JPY) rose sharply after the BoJ raised interest rates by 15 basis points (bps) last week, with Governor Kazuo Ueda subsequently stating that interest rates were still at “very low” levels.
Additionally, Treasury yields are recovering after plunging earlier in the month. The 10-year US Treasury note is currently offering 3.93%, while the 2-year bond is yielding around 4.0%. As a result, equities around the world are trading in better tone, weighing unevenly on the US dollar.
The macroeconomic calendar, meanwhile, remains sparse. Germany released the trade balance for June, which showed a surplus of 20.4 billion euros, below expectations. In addition, industrial production rose 1.4% in the same month from May, but was 4.1% below the year-ago figure. The US released MBA mortgage applications for the week ending August 2, which rose 6.9%. The country will later release consumer credit amendments for June.
EUR/USD short-term technical outlook
Heading into Wall Street, the Euro is one of the USD’s weakest competitors. The daily chart for the EUR/USD pair shows it trading in the red, at the lower end of Tuesday’s range. Moreover, the Momentum indicator is struggling to stay in positive territory and is currently neutral, while the Relative Strength Index (RSI) indicator is falling above its 50 level. On a positive note, the pair continues to trade well above its moving averages, with the 20 Simple Moving Average (SMA) maintaining its bullish tilt at around 1.0875.
In the short term and according to the 4-hour chart, the pair is neutral to bearish. EUR/USD is trading a few pips below a firmly bullish 20 SMA while well above the directionless 100 and 200 SMAs. However, technical indicators are moving south within neutral levels, with limited momentum but still pointing to further downside. The pair needs to break the 1.0890 support level with volume to continue its downtrend in the coming sessions.
Support Levels: 1.0890 1.0845 1.0800
Resistance Levels: 1.0950 1.1005 1.1045
