EUR/USD plunges from around parity to 0.9850 amid a strong US dollar

The EUR/USD is erasing some of Tuesday’s gains as speculations of a Fed pivot towards a dovish stance faded, as shown by US T-bond yields rising again, while US Services PMI data, even though slowed, remains at expansionary territory. At the time of writing, the EUR/USD is trading at 0.9852 after hitting a daily high close to parity.

EUR/USD dropped on a strong US dollar

Sentiment deteriorated, as previously mentioned, as a possible Fed pivot faded. US economic data revealed during the day showed that private payrolls increased by 208K, as depicted by the ADP National Employment for September. Later in the day, economic activity in the Services sector showed mixed readings, though the ISM flashed that the economy is still expanding at a slower pace.

The S&P Global Services and Composite PMIs came at 49.3 and 49.5, respectively. Nevertheless, the ISM Non-Manufacturing PMI dived to 56.7, less than August’s 56.9 but exceeded estimations of 56.0. Given the backdrop, the US economy stayed resilient amidst an aggressive tightening cycle by the US Federal Reserve, therefore bolstering the greenback.

Hence, the EUR/USD dipped 130 pips on the day towards current exchange rates. In the meantime, the US 10-year Treasury bond yield is rising 16 bps, up at 3.781%, a headwind for the EUR/USD.

At the same time, the US Department of Commerce reported that the US Trade deficit narrowed by 4.3% to $67.4 billion in August, the lowest since May 2021.

Aside from this, the Eurozone reported that business activity slowed, as shown by the S&P Global PMI survey, further cementing the case of the EU’s getting into a recession as a stagflation scenario looms. Services activity weakened in Germany, Italy, and Spain, except for France, though it grew weaker than estimated.

EUR/USD Key Technical Levels