Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0600.
- Add a stop-loss at 1.0430.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0465 and a take-profit at 1.0400.
- Add a stop-loss at 1.0545.
The EUR/USD exchange rate continued its downward trend as US bond yields jumped to the highest point in more than 16 years. The pair slipped to a multi-month low of 1.0493 as the US dollar strength continued.
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Bond rout continues
The US dollar continued rising as the bond market rout gained steam after Congress passed a short-term spending measure. The DXY index jumped by more than 0.67% and reached a multi-month high of $106.52 Data shows that the 10-year Treasury yield jumped to 4.67% while the 30-year jumped to 4.75%. As a result, the spread between the 10 and 2-year Treasuries dropped to -47.6.
Bond funds also plunged, with the closely watched iShares 20 Plus Year Treasury Bond ETF (TLT) and the Vanguard Long-Term Treasury Index (VGLT) plunging to their lowest levels in almost a decade.
This performance happened amid rising concerns about the US government debt and the elevated interest rates. Rates have jumped from the pandemic-era low of 0% to 5.50% and the Fed has pointed to more hikes later this year.
The US has continued to add to its total spending, which has pushed the total public debt to over $33 trillion. Servicing the government debt has now become so expensive such that it has moved above defense spending. At the same time, the biggest holders of US public debt like China and Saudi Arabia have started slashing their holdings.
There will be no major news from Europe on Tuesday. The only one that could move the EUR/USD pair will be the latest JOLTs job openings data. Economists expect the data to show that the number of openings rose slightly to 8.83 million in August. Fed’s Raphael Bostic will also deliver a speech.
EUR/USD technical analysis
The EUR/USD pair continued falling, meaning it has erased over 6.5% from its highest point in July. It has remained below the 25-period and 50-period moving averages and the Ichimoku cloud. The MACD has remained below the neutral point. It has also moved to the first support of the Woodie pivot point.
The pair has also formed a small double-bottom pattern whose neckline is at 1.0613. Therefore, the pair will likely crawl back in the near term as some investors buy the dip. If this happens, the pair will retest the key resistance at 1.0613.
