USD/JPY, Treasury Yields Struggle Ahead Of More Fed Rhetoric -

USD/JPY, Treasury Yields Struggle Ahead Of More Fed Rhetoric

Sep 07, 2017Jeremy ParkinsonFinance0

Ticker

Last

High

Low

Daily Change (pip)

Daily Range (pip)

EUR/USD

1.2029

1.2059

1.1914

112

145

EUR/USD breaks out of the narrow range from earlier this week, with the pair at risk for a further advance as the European Central Bank (ECB) appears to be on course to conclude its quantitative easing (QE) program.

Even though the ECB remains in no rush to remove the zero-interest rate policy (ZIRP), it seems as though the Governing Council will stick to the December deadline for the Public Sector Purchase Programme (PSPP) as officials warn rates will ‘remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases.’ Moreover, the recent comments from President Mario Draghi and Co. suggest the central bank will continue to tolerate the appreciation in the Euro exchange rate as ‘the current positive cyclical momentum increases the chances of a stronger than expected economic upswing,’ and the central bank may continue to gradually alter the monetary policy outlook over the coming months as ‘risks surrounding the euro area growth outlook remain broadly balanced.’ In turn, the shift in EUR/USD behavior may continue to unfold ahead of the next ECB meeting on October 26 as the Governing Council remains confident in achieving the 2% inflation-target over the policy horizon.

Nevertheless, EUR/USD may face a bumpy road ahead of the Federal Open Market Committee (FOMC) interest rate decision on September 20 as Chair Janet Yellen and Co. are also scheduled to release their new projections for growth, inflation and the benchmark interest rate.

EUR/USD Daily Chart

Near-term outlook remains constructive for EUR/USD as it breaks out of the holding pattern from earlier this week, with a break of the 2017-high (1.2070) raising the risk for a run at the 1.2130 (50% retracement) hurdle, with the next region of interest coming in around 1.2230 (50% retracement).

Keeping a close eye on the Relative Strength Index (RSI) as it works its way back towards overbought territory, with EUR/USD at risk for a further advance should the oscillator bullish momentum gather pace; however, failure to push above 70 may undermine the resilience in the euro-dollar exchange rate as the oscillator starts to deviate with price.