EUR/USD erases losses as Wall Street tumbles and US bonds jump

• US Dollar drops sharply as US yields reversed.  
• EUR/USD bounces from 2-month lows, approaches 1.1400.  

The EUR/USD pair almost 50 pips from the 2-month lows it reached earlier at 1.1333 amid a slide of the US dollar across the board. The euro hit a fresh daily high 1.1386 and as of writing was hovering around 1.1380, modestly higher for the day.  

The move to the upside took place amid a sharp slide in equity prices. The Dow Jones was falling 400 points or 1.61%. The index hit a fresh 3-month low. The main driver of USD weakens appears to be a decline in US yields. The 10-year dropped to 3.06%, the lowest in three weeks (seven days ago that yield was testing 3.20%) on the back of risk aversion.

The US Dollar Index reversed sharply erasing all gains. Earlier today approached 2018 highs and peaked at 96.87, before turning to the downside. Recently hit a fresh daily low at 96.50. US Q3 GDP data failed to boost the greenback and now attention remains Wall Street. Regarding the euro, S&P will make today an announcement on Italy’s credit rating.  

EUR/USD Levels to watch  

The euro is bouncing today from near the 1.1300 area that also capped the downside two months ago, showing some positive signals after days of significant losses. If the correction extends, resistance levels might be located at 1.1385 (Oct 26 high), followed by 1.1400 and 1.1430 (Oct 9, 19 low / Oct 25 high). On the downside, the immediate support is seen at 1.1355 followed by 1.1330/35 that protects the key 1.1300 zone.