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  • EUR/USD trades 0.37% lower on the day, extends a two-day losing streak. 
  • Rising Treasury yields weigh over risk sentiment, lift the US dollar. 

The oversold safe-haven US dollar is drawing bids and pushing EUR/USD lower with risk sentiment weakening. 

The currency pair is trading near 1.2172 at press time, the lowest since Dec. 23, representing a nearly 0.4% drop on the day. The futures tied to the S&P 500, Wall Street’s benchmark index, are trading 0.6% lower. Major Asian equity indices are trading lower along with growth-sensitive currencies such as the Aussie dollar. 

The uptick in the US treasury yields and the steepening of the yield curve looks to be fueling losses in the US stock futures and Asian equities and powering gains in the greenback. The yields on the 10- and 30-year bonds have risen by 20 basis points and 22 basis points, respectively, this month. Meanwhile, the spread between the 10- and two-year yields has risen to the highest level since 2017. 

The rising bond yields weaken the case for investing in stocks. “A big argument for buying the US stocks now at such high valuations is their value relative to extraordinarily low bond yields. As Treasury yields rise, that advantage gets diminished,” Bloomberg’s Lisa Abramowicz tweeted last week. 

According to Adam Button, Currency Analyst at AshrafLaidi.com, a sustained ascent in yields will eventually work against equities and provide a significant tailwind for the dollar. ” Whether that’s at 1.4%, 1.6%, 2% or beyond remains to be seen,” Button noted. 

Technical levels