Posts

May 5th, US bond yield weighs on euro

avatar of @notesfortrader
25
@notesfortrader
·
·
0 views
·
3 min read

On Tuesday, May 4, trading in the euro ended in decline. The EUR / USD pair fell 0.42% to 1.2013. During trading in Europe, the price declined to the level of 1.1999, from which it increased to 1.2035. Buyers defended the 1.20 level, but failed to bounce up enough pips. From 1.2035 they were thrown by the head of the US Treasury J. Yellen, causing a hurricane on the stock exchanges. The dollar index rose. The S & P500 fell 1.53% to 4128.5. The yield on the 10-year bond rose from 1.557% to 1.598%.

Yellen said interest rates may need to be raised to prevent the American economy from overheating. Then she gave the back saying that she did not forecast an increase in interest rates to curb inflation.

Jannette Yellen was the head of the Fed and knows Powell won't listen to her. She suggested, but did not recommend, to raise rates. It all boiled down to being misunderstood.

Scheduled statistics (GMT +3):

  • From 10:50 am to 11:00 am, there will be indexes of business activity in the services sector for April in France, Germany and the eurozone.
  • 12:00 in the euro area will be released the forecast for the economy from the European Commission, as well as the producer price index for March.
  • 15:15, the US is to publish the ADP Employment Change Report for April.
  • 16:45, the US PMI will be released for the services sector for April, and at 17:00 - the ISM PMI for April.
  • 17:30 the US Department of Energy will provide data on changes in oil and petroleum product inventories.

Current situation:

In Asian trading, the US dollar is losing ground to its competitors. The leaders of growth are the New Zealand dollar (+ 0.43%) and the Australian dollar (+ 0.34%).

The New Zealand dollar has risen in price after the release of a strong report on jobs. New Zealand's Q1 Employment Report showed more jobs added than expected. The unemployment rate was lower despite the increase in the participation rate. Unemployment fell to 4.7% against the forecast and the previous value of 4.9%. Other currencies followed the New Zealander.

At the time of writing, the euro is worth 1.2013. Treasury yields are growing and are holding back the rise in the euro / dollar pair. The New Zealand dollar is also losing its morning gains. If at trading in Europe the dollar goes on the offensive on all fronts, then sellers will try to disassemble the support of 1,200 (4) in order to get to the stops and ride them to the lower border of the channel 1.1985 (5).

Market participants' attention is focused on the indices of old-time activity in the service sector for April in France, Germany, the eurozone and the United States. The main trigger for currencies is still the yield on 10-year bonds. With an increase in profitability, the euro becomes cheaper, with a decrease, it becomes more expensive.

Also watch the dynamics of the EUR / GBP cross pair. The single currency shows weakness against the British, so the sellers of the euro are just waiting for the cross to fall to the 0.8614 level in order to pass the 1.20 psychological level.

Summary: at the auctions in Asia, the single currency remains in a weak position against the dollar and the euro. The yield on 10-year US bonds is increasing, which puts additional pressure on the single currency.

The euro is trading near the psychological level of 1.20 in anticipation of European statistics. If the data turns out to be above the forecasted values, the probability of seeing a rebound to the level of 1.2035 remains. In other variations, sellers dominate and prepare to storm the 1.20 level.

Posted Using LeoFinance Beta