Growth in Treasury yields is a bearish signal for EURUSD – ForTrader.org financial magazine


On Monday, May 31, trading in the euro ended with growth. The single currency gained 0.26% to 1.2224. Trading volumes were reduced due to the weekend in the US and UK. States celebrated Memorial Day, Great Britain – May bank holiday.

The euro / dollar pair traded for 17 hours in the range of 1.2183-1.2205. In the American session in the thin market, the price moved to 1.2228 in one hour. There was no news behind the growth. It is believed that traders adjusted their positions on the last day of the month.

Scheduled statistics (GMT + 3)

  • From 10:30 to 11:30 PMIs for the manufacturing sector for May in Switzerland, France, Germany, the eurozone and the UK will be released.
  • At 10:55 am Germany is to publish a report with data on changes in the unemployment rate and the number of unemployed in May.
  • At 12:00 in the eurozone will be released consumer price index for May and data on changes in the unemployment rate for April.
  • At 15:30, Canada will report on the change in the volume of GDP for March.
  • At 16:45, the US is to publish the Markit Manufacturing PMI for May.
  • At 17:00, the US will release the ISM Manufacturing Index for May.
  • Bank of England Governor Bailey will deliver a speech at 18:00. The OPEC-JMMC meeting will also take place on Tuesday.

Current situation

At the time of this writing, the euro is worth 1.2221. Major currencies are trading in positive territory, except for the franc. The first line in terms of profitability is occupied by the Australian dollar, which in Asia has acted as a locomotive for the entire market. It has risen in price against the US dollar after the release of statistics in China and Australia.

The index of business activity in the manufacturing sector in China in May was 52.0, against 51.9 earlier (the forecast was 52.0).

The index of activity in the manufacturing sector in Australia from AIG in May was 61.8, against 61.7 earlier. Manufacturing PMI rose to 60.4 in May from 59.7. Australia’s manufacturing sector continued to grow at a record pace in May, driven by strong demand driving production growth.

In the morning, the major currencies have strengthened, but there is a serious signal for their weakening. Yesterday, due to a national holiday in the United States, trades on American bonds were not held. Today, the yield on 10-year Treasuries jumped to 1.618%. Rising yields are supporting the dollar. With a further increase in the yield on US10Y in major currencies, buyers may begin to take profits from the latest rise.

The technical picture on the hourly TF turned from bullish to neutral due to yesterday’s growth. Taking into account the growth of US10Y, it is better to stay out of the market until the American session. If the euro stands above 1.2200, then it will be possible to look closely at the continuation of growth.

On Tuesday at the European session, there will be indexes of business activity in the manufacturing sector of European countries. Later in the day, the US is to publish the ISM Manufacturing PMI, which is expected to improve to 61 in May from 60.7 in April. OPEC + will announce a decision on oil production for the second half of the year. The decision is important for commodity currencies.

Summary: after Friday’s statistics in the US, the euro bounced back to the level of 1.2205. On Monday, in the thin market, the euro rose to 1.2231. In Asia, buyers moved 1.2236 highs on the back of published positive statistics in China and Australia. In the morning, major currencies have strengthened against the dollar as the yield on 10-year bonds rose. Yield growth is a bearish signal for the euro. Further gains in US10Y remain high risks of falling to 1.2205 before hitting the 1.2266 high of May 25.

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