Dollar Index Eyes $102 as US Bond Yields Push Higher, Euro Under Pressure

Market Overview

The EUR/USD pair has been under pressure recently, influenced by weaker-than-expected European manufacturing data. Spain’s Manufacturing PMI came in at 50.5, down from 51.4, while Italy’s was even lower at 49.4, signaling contraction.

France and Germany’s manufacturing sectors also struggled, with PMIs at 42.1 and 42.4, respectively, dragging the Euro down.

Meanwhile, the Dollar Index (DXY) has seen a modest rise to 101.752, supported by the U.S. 10-year bond yields, which remain elevated, reflecting investor expectations of higher U.S. interest rates. This has kept the dollar strong against the Euro.

Events Ahead

Looking forward, the U.S. ISM Manufacturing PMI is expected at 47.5, up slightly from 46.8. If the data comes in as forecasted or better, we could see further strength in the Dollar Index.

Additionally, construction spending is expected to increase by 0.1%, which could bolster the dollar further. The EUR/USD pair may remain under pressure if U.S. economic data continues to outperform that of the Eurozone, making it an important day for traders to watch.

US Dollar Index (DXY)

The Dollar Index (DXY) is trading at $101.752, up 0.11% in the last 4 hours. The index remains bullish, supported by an upward channel that has kept prices above the pivot point at $101.630. Immediate resistance is $101.864, with further resistance at $102.039 and $102.236.

On the downside, support is $101.402, followed by $101.181 and $100.964. The 50-day EMA at $101.462 provides additional support, while the 200-day EMA at $101.836 could act as a resistance barrier.

The overall trend remains bullish as long as the price stays above $101.630, but a break below this level could trigger a sharper selling trend.

US 10-year Bond Yields

The U.S. 10-year Treasury yield is trading around 3.92%, showing strength as it remains within an ascending channel on the 2-hour chart. The yield has briefly tested resistance near 3.94%, which, if breached, could push it towards 3.98%. However, a failure to break above could lead to a retracement toward 3.90% or even 3.88%.

The rising yield generally suggests that investors demand higher returns, which strengthens the U.S. dollar.

As yields rise, the dollar often gains because higher yields make U.S. assets more attractive to foreign investors, thereby increasing demand for the currency. Keep an eye on these levels for potential market moves.

EUR/USD Technical Forecast

The EUR/USD pair is trading at $1.10551, down 0.13% over the last 4 hours. The currency pair faces resistance at the pivot point of $1.10691, with the 50-day EMA at $1.10835 providing additional resistance.

If the price breaks above these levels, we could see a shift toward a more bullish bias, with resistance targets at $1.11011, $1.11278, and $1.11599. On the downside, immediate support is at $1.10388, followed by $1.10112 and $1.09854.

The trend remains bearish as long as the price stays below $1.10691, but a break above this pivot could indicate a potential reversal. Keep an eye on these key levels for directional cues.