The EURUSD has moved sharply lower as the market digests a more hawkish message from Fed Chair Kevin Warsh. The probability of a Fed rate hike has climbed to around 60%, up from the low-30% range earlier this week. That repricing has pushed U.S. yields and the dollar higher, sending the EURUSD toward a key cluster of technical support.
Earlier, the pair found willing sellers below its 100- and 200-hour moving averages. The subsequent break below the 200-day moving average, currently near 1.1630, added to the bearish technical bias and opened the door for the move toward the next downside targets.
The price is now testing a swing area between 1.15937 and 1.15872. Just below that zone sits the 38.2% retracement of the rally from the July low at 1.15733, along with the rising 100-day moving average near 1.1570. Together, those levels form an important cluster of support.
This is where buyers need to show up if they are going to slow the decline. Holding the cluster could lead to a corrective rotation back toward 1.16215 and the 200-day moving average at 1.16302. However, buyers would still need to reclaim the 100- and 200-hour moving averages near the 1.1655–1.1660 area to take back more meaningful control.
Conversely, a sustained break below the 100-day moving average would increase the bearish bias and likely encourage additional selling. The next downside targets would come near 1.15578, followed by the 50% retracement at 1.15356.
As the dollar moves higher, not coincidentally, yields are moving higher with the two-year now up 10.31 basis points to 4.335%. The 10 year yield up 5.2 basis points to 4.724%. The major indices are all in negative territory with the NASDAQ 100 down -0.70%. The small-cap Russell 2000 is down -1.21% and 8 NASDAQ composite is down -0.44%.
Overall, t’s he sellers remain in control, but the EURUSD has reached a technically important decision area. Buyers have a level against which they can lean and define risk. If that support fails, however, the downside door opens further. Be aware. Be prepared.
This article was written by Greg Michalowski at investinglive.com.