Search ForexCrunch
  • EUR/USD rises as stock market gains keep the dollar under pressure. 
  • Yellen calls for big fiscal spending, powers risk assets higher. 
  • The spread between the US-Eurozone inflation expectations favors a drop in EUR/USD.

Dollar sellers power EUR/USD higher to key technical hurdle as stocks markets across Asia cheer prospects of massive fiscal spending in the US. 

Yellen favors big spending

The US Treasury Secretary nominee Janet Yellen advocated for a hefty fiscal relief package on Tuesday, stating that the benefits of increased spending are greater than the costs associated with a higher debt burden. 

Yellen’s comments put a bid under the US stocks, lifting major indices higher. The risk-on has hit the Asian shores, pushing stock markets to record highs. As such, the anti-risk dollar is losing ground against the EUR and other major currencies. 

A better-than-expected German Zew survey released Tuesday could be adding to bullish pressures around EUR/USD apart from Yellen’s comments. 

EUR/USD is currently trading 0.14% higher on the day at 1.2145. The pair almost tested the 200-hour Simple Moving Average (SMA) at 1.2153 in Asia, having rallied by 0.45% on Tuesday. 

However, readers should note that the Eurozone inflation expectations are considerably lower than in the US and could complicate EUR/USD’s recovery from Monday’s low of 1.2054. 

The US 10-year breakeven rate, which represents how the market foresees long-term price pressures, rose to 2.10% on Tuesday to hit the highest level since Oct. 22, 2018. With inflation expectations rising well above Federal Reserve’s 2% inflation target, the US Treasury yields could continue to rise in a USD-positive manner. The 10-year yield is currently seen at 1.09%, having risen from 0.90% to 1.18% earlier this month. 

  • EUR/USD options market is positioned for EUR weakness

Technical levels

  • EUR/USD Price Analysis: Looks north with falling wedge breakout on 4H