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Trading on the EUR/USD pair closed down on Tuesday. The single currency depreciated against the dollar on the back of a rise in US 10-year bond yields and a drop in their German equivalent.

By the end of the day, US 10-year bond yields had risen by 0.72% to 2.494%. German 10-year bond yields fell by 3.17% to 0.319%. The price found some support at around the 1.0560 mark, where the pair has been caught in a sideways trend for the last 17 hours or so.

Market expectations:

Expectations of an interest rate hike in the US are facilitating a downwards correction of the euro. After speeches from Janet Yellen and other Fed members last week, the probability of a rate hike in March reached 86.4% on Monday.

Six days remain until the Federal Reserve announces their decision. It’s worth noting that the probability of a rate hike has started to decrease. On Tuesday the 7th of March, according to CME Group’s FedWatch, the probability of interest rates being raised in March dropped from 86.4% to 84.1%, in May from 87.5% to 85.5%, and in June from 92.7% to 92.2%.

Traders on Wednesday will be looking at the ADP jobs report, and on Friday at the official statistics from the US Department of Labor. Friday’s payrolls should tell us whether or not the Fed will raise interest rates.

On the hourly timeframe, the euro has completed a correctional model similar to a triangle. Cyclical analysis points towards a reversal of the downwards movement sometime in the middle of the day. For Wednesday, I’m forecasting a drop in the rate to 1.0537 with a subsequent rebound to around 1.0563.

Day’s news (GMT+3):