Dollar Index Near $101.274 Pivot: Will Treasury Yields Fuel Further Gains?

Market Overview

The EUR/USD is currently trading at $1.10775, showing little movement after mixed Eurozone data. Germany reported a 0.4% decline in import prices, while French GDP remained 0.2% for Q2. Meanwhile, the U.S. 10-year bond yield hovers near 3.86%, testing key resistance at 3.88%.

The possibility of higher yields as investors seek higher returns supports the Dollar Index (DXY), trading at $101.005. The euro remains slightly bullish above $1.10691, but the U.S. dollar could gain strength if Treasury yields break through the 3.89% resistance, pushing EUR/USD lower.

Events Ahead

The Eurozone’s CPI Flash Estimate is expected to come in at 2.2% year-over-year, with the core CPI at 2.8%. In the U.S., the Core PCE Price Index, a key inflation measure, is forecasted to remain steady at 0.2% month-over-month.

Traders should watch these events closely as they could further impact the EUR/USD and the Dollar Index.

US Dollar Index (DXY)

The Dollar Index (DXY) is trading at $101.005, up 0.05% on the day. It maintains its position within an upward channel on the 4-hour chart. The index is hovering just below a key pivot point at $101.274, which serves as a critical level to watch.

If the price breaks above this pivot, the immediate resistance lies at $101.574, with further upside targets at $101.850 and $102.246.

On the downside, immediate support is $100.897, with additional support levels at $100.534 and $100.244. The 50-day EMA at $101.120 is also providing near-term support.

Overall, the outlook remains bullish above $101.274, but a break below this level could lead to a sharp selling trend.

US 10-year Bond Yields

The U.S. 10-year bond yields near 3.86%, testing the 200-period EMA at 3.88% on the 2-hour chart. This level is crucial as a break above it could signal higher yields, which typically strengthen the U.S. dollar as investors seek better returns.

An ascending trendline has supported the yield, indicating a potential continuation of the uptrend if it breaks through the resistance at 3.89%. However, if it fails to clear this level, the yield might pull back toward the 50-period EMA at 3.84%, which could weaken the dollar slightly.

EUR/USD Technical Forecast

The EUR/USD trades at $1.10775, showing little movement as it hovers just above the key pivot point at $1.10691 on the 4-hour chart. Staying above this level is crucial, as staying above it keeps the outlook bullish, with immediate resistance at $1.11011. Should the euro break past this, further targets are set at $1.11278 and $1.11599.

On the downside, immediate support costs $1.10388, with additional safety nets at $1.10112 and $1.09854. The 50-day EMA at $1.11185 is slightly above the current price, preventing further gains. The pair remains bullish above $1.10691, but a break below this level could trigger a more significant decline.