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May 24 - 01:55 PM

EUR/USD - COMMENT-EUR/USD Upside Looks Like The Path Of Least Resistance

By Christopher Romano  —  May 24 - 10:57 AM

EUR/USD rose on Monday, erasing much of the previous session's sharp fall as upside risks mounted on the back of yields, risk sentiment and technical signals.

Slightly diverging rates paths between the euro zone and U.S. were underpinning EUR/USD.
German yields bounced off short-term support while U.S. yields looked set to break below short-term support.
Tightening German-U.S.
yield spreads eroded the dollar's yield advantage.

Euribor prices FEIZ2 have been falling and eurodollar prices EDZ2 rising as investors position for the possibility of the ECB beginning to tighten before the Fed.

Upbeat risk sentiment sent the dollar lower, with equities ESv1 recovering from their recent sharp fall, while oil LCOc1 extended Friday's bounce off of key support.

Technicals highlight upside risks.
EUR/USD is in a consolidation phase, which should resolve with new highs.
Daily and monthly RSIs are rising which implies upside momentum.
EUR/USD is trading above the 10- and 21-DMAs and within a bull trend channel.

Resistance near 1.2250 remains an impediment for EUR/USD longs but a break could trigger stops above.
January's monthly high and possibly the 2018 yearly high would then be targeted.

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Refinitiv IFR Research/Market Commentary


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