EUR/USD remains pressured around the yearly low near 1.1230, recently easing ahead of Tuesday’s European session. The currency major pair dropped during the last two consecutive days to refresh the 16-month low as firmer US Treasury yields underpinned the US Dollar Index (DXY) strength.
US 10-year bond coupon jumped the most in a week the previous day as US President Joe Biden nominates Jerome Powell for another term as the Federal Reserve (Fed) Chair while also proposing Richard Clarida’s name for Vice-Chairman’s post. Given the recently hawkish expectations from Powell, Biden’s nomination propelled the Fed rate hike call and enabled the Treasury yields to reverse the previous week’s loss in a single before hovering in Asia amid Japan’s off.
Atlanta Federal Reserve President Raphael Bostic and US Treasury Secretary Janet Yellen praised Biden's decision while flashing mixed signals over the Fed's next moves and inflation. However, they both failed to impress markets with an absence of new comments. While Fed’s Bostic highlighted faster taper and covid economy, Yellen mentioned during the Bloomberg interview that price pressures subside as life normalizes in 2022.
Also exerting downside pressure on the EUR/USD are the recently escalating COVID-19 woes in the bloc. “Austria became on Monday the first country in western Europe to reimpose lockdown since vaccines were rolled out, shutting non-essential shops, bars and cafes as surging caseloads raised the specter of a second straight winter in deep freeze for the continent,” said Reuters. The news also quotes the outgoing German Chancellor Angela Merkel as saying, “We are in a highly dramatic situation. What is in place now is not sufficient.”
Furthermore, the European Central Bank (ECB) policymakers’ dovish comments and the market’s firmer belief that the Fed will precede the regional central bank as far as the rate hike is concerned also weigh on the EUR/USD prices. Recently, ECB’s Governing Council members, namely Martins Kazaks and François Villeroy de Galhau flashed mixed signals over ending the Pandemic Emergency Purchase Programme (PEPP).
Amid these plays, the US 10-year Treasury yields hover around 1.627% whereas stock futures in the US and Europe remain lackluster at the latest. Further, the US Dollar Index (DXY) seesaw around a 16-week high flashed earlier in Asia.
Moving on, likely easy PMI figures from Germany and Eurozone may help the EUR/USD bears to keep reins ahead of the key US PMI data. Should Markit PMI numbers confirm inflation fears via activity numbers, the major pair will have a further downside to track.
While oversold RSI conditions hint at a corrective pullback towards a two-week-old resistance line near 1.1320, EUR/USD will be vulnerable to test June 2020 low near 1.1170 on the downside break of the 1.1200 threshold.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2022 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.