- The US dollar reached a fresh 10-month high due to a significant surge in US bond yields.
- The European Central Bank’s record high deposit rate might help cut inflation to 2%.
- Investors see a slight chance of an ECB rate cut by June next year.
The current EUR/USD price analysis indicates a bearish outlook, as the US dollar reached a fresh 10-month high on Tuesday due to a significant surge in US bond yields.
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Fed policymaker Neel Kashkari stated on Monday that, given the resilience of the US economy, interest rates should probably rise again and stay “higher for longer” until inflation drops back to 2%. These remarks pushed up yields. Consequently, higher US yields increased the greenback’s allure, pushing the dollar to the highest since late November 2022.
Elsewhere, the European Central Bank’s record high deposit rate might help cut inflation to 2%, according to ECB President Christine Lagarde on Monday. Moreover, she restated the bank’s guidance, which remains unclear on rate hikes.
However, policymakers have interpreted this guidance differently in the past week. One extreme argues that the next move will likely be a rate cut, while the other side says the chance of another hike is close to 50%.
Furthermore, Lagarde highlighted some mild softening in an otherwise strong labor market. This softening will likely help disinflation after increased nominal wage growth kept pressure on prices.
Meanwhile, markets see no further rate hikes on the argument that concerns over an economic slowdown will soon become a bigger worry than inflation. Moreover, investors see a slight chance of a rate cut by June next year.
EUR/USD key events today
All major reports today will come from the US, including the following:
- The CB consumer confidence report.
- The new home sales report.
- The building permits report.
EUR/USD technical price analysis: Decline temporarily stalls below 1.0601.
The bias for the EUR/USD price on the 4-hour chart is bearish. However, the decline has paused below the 1.0601 key level, allowing bulls to retest the level as resistance. Still, indicators on the chart support a continuation of the downtrend.
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The 30-SMA trades far above the price, indicating that bears are making large swings lower. At the same time, the RSI supports solid bearish momentum as it trades near the oversold region. Therefore, if bears resurface at the 1.0601 level, the price will likely drop to the 1.0550 support level.
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