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.

Comments 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 in 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 markets 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)

In 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.