EUR/USD is still for sale on rallies as EUR/US ran into sellers at the 1.4890 level. Despite assurances from the Fed Chairman that the Fed is in no mood to take away the punch bowl, EUR/USD was unable to overcome overnight highs and trigger the stops perched above. Having seen 1.4760 trade early today, stale longs seem happy to get out into strength.
Friday’s fall in EUR/USD was largely predicated on the fear that the Fed could move interest rate hikes forward into the first half of 2010. Bernanke seemed to throw cold water on that by reiterating that rates will stay low “for an extended period” which the market assumes to be at least six months.
If EUR/USD can’t rally in sustained fashion on a return to the status-quo, as far as the Fed is concerned, that indicates to us that the technicals are in control and that the market still has EUR/USD to sell.
Helping the greenback in the last few minutes are forecasts from Morgan Stanley, predicting US 10-year Treasuries will rise to 4.5% in the first half of 2010. They also see a steeper yield curve. 2s-10s is seen rising to 3.25% from 2.67% today.
EUR/USD has dipped to 1.4855
