- The euro ticks up against a weaker USD and returns to 1.1580.
- The greenback pulls back as the US bond yields' curve flattens.
- EUR/USD remains negative, heading towards 1.1000 – Credit Suisse.
The euro is taking advantage of a somewhat softer dollar on Wednesday to regain lost ground. The pair has bottomed at year-to-date lows at 1.1525 to appreciate about 0.4% on the day, reaching session highs near 1.1580 so far.
The dollar loses ground as the US yield curve flattens
The greenback is trading lower against its main peers on Wednesday, weighed by a flattening US bond yield curve. The benchmark 10-year note has pulled back to 1.57% from levels above 1.6% on Tuesday, while shorter-term yields are building up. The yield of the 2-year Treasury bond has climbed to 0.35%, its highest level in 18 months.
On the macroeconomic calendar, US Consumer Prices have confirmed the inflationary trend observed over the previous months. Consumer inflation accelerated at a 0.4% pace in September, from 0.3% in the previous month while the yearly inflation increased by 5.4%, from 5.3% in August.
These figures cast doubt on Fed Powell’s theory of “temporary” high inflation pressures, adding pressure on the US central bank to announce QE tapering in November.
EUR/USD remains bearish, targeting 1.1000 – Credit Suisse
The current euro recovery, however, is seen as a mere correction by Credit Suisse’s FX Analysis team. In a bigger picture, the pair remains heading lower: “EUR/USD is probing the weekly Ichimoku cloud and is close to the peak of March 2020 at 1.1495. Defending this can result in a rebound, however, 1.1665 could cap (…) Below 1.1495, next support could be at 1.1450 and projections of 1.1380 (…) “Whilst we would expect a fresh hold at 1.1290, we continue to see the broader risks skewed to the downside, with support seen next at 1.1020/00.”
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD jumps above 0.6500 after hot Australian CPI data
AUD/USD extended gains and recaptured 0.6500 in Asian trading, following the release of hotter-than-expected Australian inflation data. The Australian CPI rose 1% in QoQ in Q1 against 0.8% forecast, providing extra legs to the Australian Dollar upside.
USD/JPY hangs near 34-year high at 154.88 as intervention risks loom
USD/JPY is sitting at a multi-decade high of 154.88 reached on Tuesday. Traders refrain from placing fresh bets on the pair as Japan's FX intervention risks loom. Broad US Dollar weakness also caps the upside in the major. US Durable Goods data are next on tap.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Crypto community reacts as BRICS considers launching stablecoin for international trade settlement
BRICS is intensifying efforts to reduce its reliance on the US dollar after plans for its stablecoin effort surfaced online on Tuesday. Most people expect the stablecoin to be backed by gold, considering BRICS nations have been accumulating large holdings of the commodity.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Fed might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.