EUR/USD: US yields drive the pair

Vasilis Tsaprounis Independent Analyst

The single European currency remains under pressure having earlier hit fresh local lows for the year at 1,0460 as Friday's strong reaction that pushed the exchange rate above 1.06 proved temporary.

US Treasury yields as well as the climate of uncertainty in the International stock markets continue to be the main catalysts that have driven the US currency higher.

The rhetoric of the European Central Bank has faded and the main reason that had driven the European currency to a strong upward Momentum with surpassing the 1,12 levels on July is no longer on the table .

The week we're in is coming down to one of the most important macro news announcements in the United States, and the likelihood of sharp swings through Friday is high.

We are currently in an environment where most of the data favors the US currency and some disappointment in the announcements is capable of bringing back a strong reaction behavior from the euro again .

Today's agenda is extremely poor and beyond the preliminary data on the US jobs sector there is nothing else of note.

The possibility of seeing Friday's behavior again with a new reaction of the European currency remains on the table .

The behavior of the market partially confirmed my thinking as expressed in Friday's article as although I am an advocate of a greater upward momentum for the European currency I noted that it is likely that this time has not yet come.

However, I do not see great chances of the rising momentum of the US currency having the same behavior as in the previous September on 2022 where it had driven the exchange rate to the levels of 0,95 .

The longer term picture of the pair moving in a broader environment between the 1.05 -1.14 levels till the end of the year as highlighted in a previous article remains my key thinking and it is likely currently the bottom of this wider range with prices below 1.05 to constitute the bearish spikes.

The question is how much range to bottom these pins will have.

Closely monitoring the data and announcements I refuse to take positions in favor of the US currency at these levels and my strategy will remain to buy on fresh dips with target the reactions .

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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