The U.S. 10-year Treasury yield broke below key levels despite hotter-than-expected consumer inflation data on Thursday nL2N2NS2F2 - and until rates find a base, the EUR/USD is likely to probe higher.
The 10-year yield broke and closed below the key 100-day moving average (currently 1.498%) for the first time since September 2020 and below the 1.47% range base that had held since March.
The first target of this significant break is the 50% retracement of the 2021 low/high at 1.342%.
Stronger support comes in at the 61.8 Fibonacci retracement of that move at 1.239% and a fall of that magnitude cannot be ruled out.
If the 10-year yield continues on a downward path, as the technicals suggest it should, the U.S.
dollar should broadly weaken and push the EUR/USD higher.
The EUR/USD has been consolidating since the start of May, resulting in a pennant formation on the charts.
The top of the narrowing pennant comes in at 1.2236 and a break above that level should increase upward momentum.
A subsequent break of the May 25 high at 1.2266 would put the 2021 peak at 1.2349 in focus.
The bullish scenario for the EUR/USD would be undermined if the rising base of the pennant at 1.2133 gives way.
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