The dollar remains in a good spot overall but EUR/USD is not one pair that is making extra headway for the greenback this week. The pair moved to test its 200-day moving average (blue line) in trading yesterday before seeing a decent bounce to 1.0890 currently. So, what's next for the pair?
From a technical perspective, this just represents a first rejection of the key level so far. Looking at the near-term bias, sellers are still in control with price still not yet near a test of the 100-hour moving average at 1.0916 at the moment. Keep below that near-term technical level and the bearish bias will still hold for now.
As much as higher Treasury yields is helping to underpin the dollar, the euro is also getting support from a bit of a rethink on the ECB outlook.
Coming into this year, traders were convinced to price in the first rate cut in April but odds of that are now sitting at ~90%. This comes after pushback by ECB policymakers and we are starting to see a line of thinking that the central bank might most likely only act just before the summer break in August.
That means while April is still on the table, chances are the more plausible option would either be in June or July in order to satisfy the hawkish members on the governing council.
As such, if traders have to further pare back bets of an April rate cut, that should be euro supportive at the balance.
On the dollar side of the equation, 10-year Treasury yields are looking poised to track higher and that is also still a considerable tailwind for the greenback. So, there are arguments to work with on both sides.
But as always, the technicals will provide a good guide for which side is taking charge. For now, EUR/USD buyers are hanging in there but sellers are still poised to try and keep the downside run going.
