In this lesson, we learned "the vulnerability of the euro to the runaway dollar with soaring US treasury bond yields". Let's get started
EUR, EUR/USD, USD, the Federal Reserve, the Federal Open Market Committee, the yield of US treasury bond bonds, China, debt default - talking points, Will the euro/dollar fall
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EUR/USD MACRO View
The decline in the euro is mainly attributed to the recent comprehensive strengthening of the US dollar.
Overnight, the minutes of the Federal Open Market Committee (FOMC) meeting showed that the board was stronger than expected by the market.
Over the past week, several Fed spokespersons have issued messages that have been the mantra for long-term monetary policy tightening. The meeting minutes indicate that if conditions permit, interest rates may be raised again.
This week, the 1-year and 2-year interest rate markets reduced the prospect of interest rate cuts by about 10-15 basis points
Perhaps more importantly, there is a parallel upward trend on the yield curve of US treasury bond bonds, which supports the "big dollar"
The trading rate of benchmark 10-year bonds is close to 4.29%, far from 4.33% in October last year, which is the highest return rate of the bonds since 2007
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The latest data on the holdings of U.S. treasury bond in June shows that China has always been a seller this year. The only month they bought U.S. treasury bond was in March, when the renminbi rose sharply.
This week, the renminbi has been weakening, and China may again sell U.S. treasury bond to sell dollars and buy renminbi
despite the People's Bank of China (PBOC) has lowered its one-year medium-term loan convenience rate from 2.65% to 2.50%, but the market's perception of the situation in the world's second largest economy has deteriorated this week
Country Garden and Sino Ocean, two very large real estate developers, have defaulted on several offshore and onshore bonds this month.
After China Rong International Trust Co., Ltd., a major participant in the Chinese trust industry, missed several obligations to clients over the past week, the concept of contagion has entered the market's lexicon.
If this situation continues, the euro/dollar may further decline.
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Daily technical analysis snapshot of euros/dollars
The euro/dollar is still below the downward trend line and seems to be falling for the fifth consecutive day.
If we want to rebound and approach the trend line, there may be resistance to the 21 and 34 day Simple Moving Average (SMA).
Potential resistance may also appear in the 1.1065 C 1.1095 region, There are several historical breakpoints and recent highs in this area, just before the psychological level of 1.1100 Furthermore, resistance may appear at the breakpoint of March 2022 high point 1.1185 or the recent high point 1.1275, which coincides with the two historical breakpoints.
Above these levels, resistance may be at the Fibonacci Extension of 1.1380 from 1.1095 to 1.0635. Just above, there are some breakpoints in the 1.1385-95 region.
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The support level may also be close to the 78.6% Fibonacci retreat level of 1.0770, slightly lower than the 200 day SMA.
Before this level, Some previous low points and breakpoints in the 10830-1.0835 area may provide support.