US yields in a dead cat bounce and is the EURUSD to break 1.2000?
Despite the recent surge in US yields and the correction in the US-Dollar, the Euro has performed strongly against the Greenback – will we soon see 1.2000 in this currency pair?
Source: Economic Events August 14, 2020 - Admiral Markets' Forex Calendar
Over the course of recent days, EURUSD finally took a breath, seeing a drop back to below 1.1800. The main driver was certainly the push higher in US yields, which also resulted in heavier volatility in precious metals, resulting in the sharpest decline in Gold prices since 2013.
But, as already pointed out in our technical piece on Wednesday for Gold, we consider the recent USD strength short-lived since the push higher in US yields is starting to result in rising expectations that the FED will sooner than later cap US yields and try to weaken the US-Dollar. Our expectation of seeing 10-year US yields going for a run to as low as 0% still stands.
With that in mind, we have a clear picture of today's Retail Sales data from the US: a worse than expected print at 12:30 pm GMT could result in US yields returning some of their gains from the past days, thus putting the USD under pressure and leaving room in EURUSD for a substantial weekly close above 1.1800.
Nevertheless, from a trader's perspective, we'd prefer a deeper short-term correction towards 1.1400/30, since this would deliver a trading setup for a more attractive risk-reward ratio, considering our midterm expectation of the EURUSD is a return to above 1.2000.
Technically, the forecast is bullish on the daily time-frame as long as we remain trading above 1.1150/1200:
Source: Admiral Markets MT5 with MT5SE Add-on EURUSD Daily chart (between May 6, 2019, to August 13, 2020). Accessed: August 13, 2020 at 10:00 PM GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of the EURUSD fell 10.2%. In 2016, it dropped by 3.2%. In 2017, it rose 13.92%. In 2018, it fell 4.4% and in 2019 it dropped by 2.2%, meaning that after five years, it was down 7.3%.
Discover the world's #1 multi-asset platform
Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modelled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
