- EUR/USD is on the rise as US yields continue to lose ground.
- Chances of aggressive Fed easing rise.
- Fears of US FX intervention to weigh over USD.
EUR/USD is flashing green ahead of London open with the US treasury yields felling the pull of gravity amid rising fears of FX intervention by the world’s biggest economy.
As of writing, the yield on the benchmark US 10-year treasury yield is trading at 2.03%, the lowest level since July 9, having dropped by six basis points on Wednesday. The yield came under pressure as chances of the US Federal Reserve cutting rates by 50 basis points on July 31 rose back to 35%. The probability had dropped to near 25% following Tuesday’s upbeat US retail sales data.
The rising odds of aggressive easing by the Fed will likely keep the US Dollar on the defensive today.
Also, President Trump’s recent Dollar-related tweets have triggered speculation that the US may intervene in the FX markets to keep the Greenback from rising. President Donald Trump on Wednesday repeated his call for the US to match efforts by China and Europe to manipulate currencies and pump money into their economies, according to Reuters.
As a result, the Dollar bulls will likely remain on the sidelines, allowing EUR/USD to rise back to the 21-day moving average, currently at 1.1286.
Note that the 21-month MA proved a tough nut to crack earlier this week. Hence, a daily close above that level could entice buyers, possibly leading to a retest of the June high of 1.1412.
The Eurozone data docket it thin, meaning the pair will continue to track US yields in Europe. The US Dollar may recover the lost ground in the North American session if the weekly jobless claims and regional manufacturing indices paint a positive picture of the US economy, forcing markets to again scale back expectations of aggressive easing by the US Fed later this month.
As of writing, EUR/USD is changing hands at 1.1242, representing 0.13% gains on the day. The pair hit a low of 1.1199 on Wednesday.
Technical Levels
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