EUR/USD retraces under 1.0900 after Macron’s victory and broad US dollar strength

• The EUR/USD reached a daily high at 1.0933 but gave back its gains.
• High global yields, France’s elections, Russo-Ukraine jitter, and China’s coronavirus outbreak dampened investors’ sentiment.
• EUR/USD Price Forecast: Macron’s lifted the pair to 1.0933, followed by a drop below 1.0900 as bears re-enter, aiming to achieve a daily close below 1.0865.

The EUR/USD found some support from Friday’s dragonfly-doji but retreated from daily highs of 1.0933, blamed on a dampened market mood spurred by high US Treasury yields, the Ukraine-Russia conflict, and China’s Covid-19 outbreak. At the time of writing, the EUR/USD is trading at 1.0879.

Global equities fall as global yields elevate, French election results lifts the euro, and China Covid-19 outbreak weighs on risk appetite

Elevating global bond yields weighed on market mood, a reflection of the aforementioned are European and US equity indices falling. The US 10-year Treasury yield is rising five basis points, sitting at 2.771%, above March 2019 cycle high, a tailwind for the buck. At press time, the US Dollar Index, a gauge of the buck’s value vs. a basket of six peers, rises 0.15%, up at 99.940, short of the 100 mark.

In geopolitics, the Russo-Ukraine tussles exerted pressure on market sentiment. As hostilities continued for the seventh consecutive week, the UK, US, Germany, and Slovakia stated that they would provide additional military equipment to Ukraine. Meanwhile, Ukraine President Zelenskyy said that they should not lose the possibility of a diplomatic solution to the war. On the Russian side, wires reported that Russian President Vladimir Putin is believed to have set himself four weeks to achieve some “victory” in Ukraine before the big Russian victory day on May 9.

China’s Covid-19 outbreak in the regions of Shanghai and Guangzhou is another factor that dampened the market sentiment. Shanghai reported 25,173 new asymptomatic cases on April 10, contrary to only 914 symptomatic ones.

Macron’s victory in France boosted the EUR

On Sunday, French President Emmanuel Macron gained the first round of voting in France and would face Marine Le Pen for the second time in five years. Macron’s achieved 27.6% of the votes against 23.4% of Marine Le Pen’s and would face her in the second round by the end of the month.

Analysts at ING said that while Macron’s victory was better than expected, it would not be seen as a secure victory in the second round. They added, “t[T]his shouldn’t lull investors into a false sense of security. Macron is the favorite to win, but the two weeks heading into the runoff will be characterized by higher volatility, in our view, so long as polls put both candidates neck and neck and within the margin of error.”

EUR/USD Price Forecast: Technical outlook

Overnight, the EUR/USD rallied above 1.0933 as a relief to French elections results but gave its gains, and traders are treading water as the pair probes April 7 cycle low at 1.0864. That said, the EUR/USD downtrend remains intact unless EUR buyers reclaim the 1.1000 mark.

The EUR/USD first support would be 1.0864. A breach of the latter would expose the April 8 cycle low at 1.0836, followed by the YTD low at 1.0806.