EUR/USD: Rising US dept yields ahead of US inflation data push the Euro below 1.0500

Vasilis Tsaprounis Independent Analyst

The single European currency is falling marginally below the 1,05 level as, as expected, the reactions could not continue and Euro's positive upward momentum is not the main scenario at the moment.

As mentioned in yesterday's article once again, the main catalysts that weigh on the European currency remain on the table, weighing on the European currency's effort to show something better than a good reaction.

Geopolitical risks, political developments on the European continent and concerns about the course of the European economy remain high on the agenda and continue to weigh on the European currency.

Without any major surprises on yesterday's agenda, the US currency returned to the forefront, supported mainly by the rise in yields on US government debt securities, which had been under pressure in recent days.

I remind that US government debt securities had made a significant rally recently with the 10-year yield peaking at 4.48.

The significant decline in yields fully confirmed the thoughts expressed in previous articles, as I had given a significant probability to the scenario that the 10-year yield would very soon approach the level of 4.00, something that would give the European currency a breather and allow it to move further away from the recent lows of 1,0330.

Indeed, the decline to the 4.12 level a few days earlier was one of the reasons that supported the European currency's temporary rise above the 1.06 level.

Today's agenda is dominated by the announcement of consumer inflation in the United States, and any deviation from expectations could strongly affect the exchange rate.

In combination with tomorrow's meeting of the European Central Bank, where a further reduction in key interest rates by 25 basis points is expected, the possibility that the euro will remain under pressure remain in the game.

There is no change in my thinking. I remain on hold, expecting a further fall in the European currency in order to consider the possibility of buying the euro.

Author

Vasilis Tsaprounis

Independent Analyst

Vassilis Tsaprounis possesses over 25 years of professional experience in Capital Markets and especially in the foreign exchange market.

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