EUR/USD jostles with 0.9680-70 support zone as yields, Fed bets underpin US dollar strength
- EUR/USD drops for the fifth consecutive day as bears poke two-week-old horizontal support area.
- US 30-year Treasury yields jump to the highest level since January 2014 amid full markets.
- DXY prints five-day uptrend as CME’s FedWatch Tool prints 78% chance of 75 bps rate hike in November.
- Comments from Fed, ECB policymakers can entertain traders amid a likely active session.
EUR/USD portrays the markets’ rush towards risk-safety as it battles with the 0.9680-70 support area during early Tuesday morning in Europe. In doing so, the major currency pair drops for the fifth consecutive day as the US Dollar Index (DXY) traces firmer yields and the hawkish Fed bets.
That said, the US Dollar Index (DXY) prints 0.16% intraday gains as it prints a five-day uptrend near 113.40. That said, the US 30-year Treasury yields rise to a fresh high since January 2014 whereas the 10-year counterpart poke the 4.0% threshold. It should be noted that the CME’s FedWatch Tool signals a 78.4% chance of the Fed’s 75 bps rate hike in November.
Also portraying the risk aversion, as well as fueling the US dollar’s safe-haven demand, is the S&P 500 Futures that drop 0.50% as bears lean towards the monthly low.
It’s worth observing that the hawkish Fed bets pay major attention to Friday’s strong report than the latest Fedspeak as Federal Reserve Vice Chair Lael Brainard and Chicago Fed President Charles Evans spread mixed messages on Monday. The reason could be linked to the market’s fears that the economic slowdown may push the major central banks, ex-Fed, to review their rate hike bias.
Moving on, too many speakers from the European Central Bank (ECB) and the US Federal Reserve (Fed) are up for offering an active day to the EUR/USD traders. Though, the bears are likely to keep the reins amid the fierce Russia-Ukraine tussles which raise doubts about the economic health of the old continent.
Technical analysis
EUR/USD sellers attack a 12-day-old support region around 0.9680-70 amid a nearly oversold RSI (14), which in turn challenges the major currency pair’s further downside. However, the quote’s sustained trading below the one-week-old descending resistance line and bearish MACD signals suggest a further south-run towards refreshing the yearly low, currently near 0.9540.
In doing so, the sellers may aim for the 61.8% Fibonacci Expansion (FE) of the pair’s August-October moves, near 0.9485. It’s worth noting, though, that the EUR/USD weakness past 0.9485 will make it vulnerable to plunge towards the September 2001 low near 0.9335.
Alternatively, an upside break of the weekly resistance line, around 0.9745 by the press time, could gradually extend the recovery move towards the monthly high near the 1.0000 psychological magnet.
Even so, the 61.8% Fibonacci retracement of the quote’s August-September fall, near 1.0050, will precede the previous monthly high near 1.0200 to challenge the bulls before giving them control.
EUR/USD: Four-hour chart
Trend: Bearish