EURUSD The euro recovers but the outlook remains bearish

The EUR/USD has been rising since Tuesday on the back of falling U.S. bond yields, especially real yields.

Comment

on Tuesday by Fed Vice Chairman Richard Clarida that the central bank

was on track to begin tapering pushed long-term bond yields lower, while

long-term inflation expectations remained at their highest level of the

year given intense inflation concerns.

As a result,

real yields on 30-year Treasuries fell from a high of -0.06% on Monday

to -0.20% on Wednesday, a drop of 14 basis points in two sessions. The

sharp decline in real yields is a major argument against the dollar i

the short term, which justifies the rebounds in major currencies and

gold in recent days.

The U.S. Consumer Price Index and

the Fed minutes were not events for the markets yesterday. The market

had little reaction to the inflation numbers and even less to the Fed

minutes which revealed nothing new. EUR/USD fell after the CPI release

but corrected that decline within the hour.

In terms of

technical analysis, EUR/USD formed a “swallow” on Wednesday, a bullish

reversal pattern in Japanese candlestick terminology, which invites a

bullish outlook in the near term.

On the 4-hour time

frame, we can see the exchange rate has broken out of a descending wedge

and its Bollinger Bands at the top, which reinforces the bullish

outlook.

 (Chart Source: Tradingview 14.10.2021)

I

the short term, the euro could therefore regain height and return to

test its former support zone at $1.1660-1.1700, but the fundamental

outlook remains bearish until the exchange rate breaks through major

resistance, the first insight being the July-September double top at

$1.1908.

Disclaimer: This material has been created for

information purposes only. All views expressed in this document are my

own and do not necessarily represent the opinions of any entity.