EURUSD is trading sideways in the early hours of Tuesday, as investors adopt a risk-averse approach in the absence of action on the macroeconomic ecosystem. The pair closed trading on Monday at +0.02%, but was marginally lower at 1.0769 at 7.50 am GMT, having shed 0.07% on the day’s opening. Markets in the US remained closed for the Presidents’ Holiday on Monday, with no economic data publication out of the Eurozone as well.
The German Deutsche Bundesbank speech on Tuesday morning indicates that Europe’s largest economy is likely in a recession. This will certainly exert downward pressure on the euro in the absence of more impactful macroeconomic data. The US dollar index, DXY is up +0.19%, showing that the dollar is regaining some of the strength lost during the last four trading sessions.
Meanwhile, yields on the 10-year US Treasury bonds remain largely unchanged, but strong around the 4.295% mark. This, too, could provide grounds for gains by the dollar, as investors look to scalp profits. Conversely, falling yields could help the euro flip losses against the dollar. EURUSD will have clearer cues Wednesday when two FOMC members speak and the Fed releases minutes of the last FOMC meeting.
The market has already come to terms with the prospect of high US interest rates beyond March, but Wednesday’s releases may give clarity on how late that might happen. In addition, the outcome of the 20-year US bond auction on the same day could provide more impetus to the dollar.
EURUSD is pivoting around 1.0785, with downward pressure coming from a weak buying momentum. The pair will likely head lower to find the first support at 1.0760, with further downside action possibly going as far as 1.0745. Upside momentum is weak and will likely be marginal. A move beyond the first resistance at 1.0805 could, however, build momentum to invalidate the bearish view, and build momentum to the second resistance at 1.0820.
EURUSD price on a 30-minute chart