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The EUR/USD pair falls as climbing US Treasury yields and risk-off sentiment bolster the US Dollar.
ECB members hint at potential rate cuts, with President Lagarde maintaining a cautious stance on inflation, targeting 2025 for stability.
The US Dollar Index (DXY) rises to 104.06 as US 10-year Treasury yields remain elevated at 4.20%.
The EUR/USD fell below 1.0800 on Tuesday, late during the North American session, as US Treasury yields climbed. Risk aversion linked to US elections and comments from European Central Bank (ECB) Council members pushed the pair toward new two-month lows at 1.0795.
The Euro hits two-month lows at 1.0795 as risk aversion grows amid US election uncertainty and dovish ECB remarks
Market mood remains fragile as Wall Street trimmed some losses, yet it remains trading in the red. A scarce economic docket in both sides of the Atlantic, keeps central bankers entertaining traders, along with US elections.
ECB’s Mario Centeno was dovish, opening the door for 50 or 25 basis points (bps) of easing, depending on upcoming data. ECB’s President Christine Lagarde said that “disinflation is on the right track” and added that the target would be reached sometime in 2025. She pushed back and said that rates will remain restrictive as long as needed.
Furthermore, ECB’s Francois Villeroy stated there’s no reason to keep rates restrictive in 2025, while ECB’s Rehn said that the growth outlook has weakened, which could increase disinflationary pressures.
On the US front, the US 10-year T-note yield climbs one bps to 4.20%, a tailwind for Greenback. In the meantime, the US Dollar Index (DXY), which tracks the buck’s performance against other six peers, is up 0.10% at 104.06.
Meanwhile, a Reuters/Ipsos poll finds Harris holds a 46%-43% lead over Trump amid voter gloom.
Four days ago, the EUR/USD dropped below the 200-day moving average (DMA) at 1.0870, turning bearish. Momentum shows that the downtrend is accelerating, with the Relative Strength Index (RSI) turning oversold. Despite this, the RSI is considered “extremely” oversold beneath 20 due to the trend’s strength.
The EUR/USD next support would be the August 1 low at 1.0777 before extending its losses to 1.0666, the June 26 low.
