rising yields – MaiMarFX

Wednesday’s trading has proven challenging as our major currency pairs struggled to find a clear direction. GBP/USD rejected 1.40 but subsequent bearish momentum was not enough to send the pair below 1.3920 on the downside. EUR/USD tried an upside break of 1.21 before the U.S. dollar strengthened, pulling the pair lower towards 1.2040. The DAX was initially the best performer but the index refrained from ticking any higher than 14200 and consequently experienced a sharp reversal towards 13900.

What was the reason for yesterday’s direction change?

Bond yields surged again, dragging down shares on Wall Street. The U.S. dollar benefits from rising yields but yesterday’s dollar strength appeared to be limited. There is a risk that tomorrow’s Nonfarm payrolls report could disappoint dollar bulls, which is why the dollar’s appreciation ahead of the report could be limited. While the Fed has no intention to tighten its monetary policy anytime soon, the rise in bond yields reflects the market’s implicit way of tightening.

The EUR/USD was little changed and we recommend paying attention to price breakouts either above 1.2110 or below 1.1980.

GBP/USD – Inverted SHS formation to predict bullish breakout?

We currently see an inverted head-shoulder pattern in the 4-hour chart which could predict upcoming bullish momentum once the 1.40-level is successfully broken to the upside. A higher target could be at around 1.4170 after a potential breakout. The pattern becomes void if price breaks below 1.3850.

DAX: After another test of 14200 failed to provide a breakout, the index remains confined to a sideways trading range between 14200 and 13600.

Subscribe to our daily signal service

We wish you good trades!

Any and all liability of the author is excluded.

And the selloff began. Global bonds experienced an aggressive selloff Thursday that drove steep losses in Treasuries and U.S. stocks. The benchmark Treasury yield spiked to a one-year high and the U.S. dollar in turn benefited from rising yields. Also, the British pound which was already extremely overbought experienced a sharp selloff, succumbing to the dollar’s rise.

Unlike the strong correction seen in GBP/USD which fell below 1.40, the EUR/USD refrained from a steep decline, still holding above 1.21. If the euro falls below 1.2090 it may extend the decline towards 1.2060 and 1.20.

In the GBP/USD we now see a support at 1.38.

The DAX fell victim to Thursday’s selloff and slid below 13800 towards 13680. A next lower target is now seen at 13600 followed by 13400. Buyers in the DAX will need to wait for another breakout above 13800 in order to expect a higher target at 14000.

We wish you good trades for the last trading day in February and a peaceful weekend!