EUR/USD sellers flirt with 1.0950 at one-month low, EU/US economics, Treasury bond yields eyed

EUR/USD seesaws around 1.0940-50 during the early hours of Thursday’s Asia session after declining to the lowest level in a month by posting a three-day downtrend in the last. In doing so, the Euro pair portrays the market’s cautious mood ahead of a slew of data from the Eurozone and the US. It’s worth noting that the risk aversion wave joins upbeat Treasury bond yields and an empty plate to offer from the bloc to underpin the US Dollar’s rally the previous day, which in turn dragged the Euro towards the lowest level since early July.

Fitch Ratings’ downgrade to the US government credit rating flagged fears of the US default and weighed on the sentiment, which in turn bolstered the US Dollar’s haven demand, drowning the EUR/USD pair due to its risk-barometer status. Apart from the haven demand, upbeat prints of the US ADP Employment Change and a run-up in the Treasury bond yields also pleased the Euro bears.

On Wednesday, US ADP Employment Change for July rose past 189K markets forecasts to 324K while the previous readings were revised down to 455K.

That said, US Treasury Secretary Janet Yellen and White House (WH) Economic Adviser Jared Bernstein defended the credibility of the US Treasury bonds and vouched for the US economic strength after Fitch Ratings’ cited such concerns as the catalysts for their downgrade to the US government credit ratings. On the same line, the US Treasury Department raised possibilities of testing demand for the US bonds after the rating cut by fueling the weekly longer-term debt issuance. The same pushed markets to remain worrisome and rush for risk safety.

Amid these plays, US 10-year Treasury bond yields rose to the highest level since November 2022 while the US Dollar Index (DXY) also jumped to a three-week top. Further, the Wall Street benchmarks also closed in the red and portrayed risk aversion.

Looking forward, Eurozone Producer Price Index (PPI) for June will precede the final activity data for July to entertain EUR/USD traders during early Thursday. Should the EU numbers flash upbeat data, the Euro pair may consolidate the latest losses.

Following that, the US ISM Services PMI, Factory Orders, Weekly Initial Jobless Claims and quarterly readings of Nonfarm Productivity and Unit Labor Costs will be crucial to watch for clear directions. It’s worth noting that the EUR/USD bears are more likely to witness further downside but it all depends upon how strongly the scheduled statistics defend the Federal Reserve’s (Fed) September rate hike.

Technical analysis

A daily closing beneath the nine-week-old rising support line, now immediate resistance near 1.0985, keeps EUR/USD sellers hopeful even if the 100-DMA tests further downside around 1.0915.