EUR/USD has continued its downward trajectory, trading below 1.0800 and marking fresh lows as bearish momentum holds.
The currency pair has lost 3.8% from its September highs, breaching critical support levels and showing signs of further weakness. The pair sits just above 1.0775, teetering on a crucial support level that could signal a more profound shift in its outlook if broken.
Technical indicators paint a bearish picture, with momentum oscillators like the stochastic deep in oversold territory and the MACD remaining well below its trigger and zero lines.
Should EUR/USD dip beneath 1.0775, further declines towards 1.0665 and potentially 1.0600 could be on the horizon.
Conversely, a rebound could push the pair toward resistance at the 200-day Simple Moving Average (SMA) near 1.0870. However, a move beyond that seems unlikely, given current market conditions.
The decline in EUR/USD comes when the US dollar has been bolstered by rising US Treasury yields and market uncertainty ahead of the upcoming US elections. The 10-year Treasury yield hit 4.20%, up significantly from earlier in the year, making the dollar more attractive to investors.
This rise in yields has been driven by concerns about the US deficit, which could balloon under a Trump presidency, and by comments from Federal Reserve officials suggesting that interest rates may remain higher than expected.
Also Read: Forex Update: US Dollar Maintains Strength Amid Election Jitters and Economic Uncertainty
US Dollar’s Strength Limits Gold’s Momentum
Meanwhile, the strength of the US dollar has also impacted gold prices. Despite ongoing geopolitical tensions, which typically drive demand for safe-haven assets like gold, the strong dollar has capped any significant gains.
Gold is above $2,738, but rising yields and dollar strength have tempered the bullish momentum. Investors remain cautious as they await the Federal Reserve’s next move, with many expecting a 25 basis point rate cut in November.
As long as the dollar remains strong, gold prices may struggle to break higher.
In the broader forex market, the euro has been one of the weakest against the dollar, losing 0.66% this week. Other major currencies like the Japanese yen and the British pound have also been under pressure, with the yen dropping 1.83% against the dollar amid rising US yields.
The cautious mood in markets has kept the US dollar in demand, with traders focused on US election risks and Federal Reserve policy.
ECB’s Lagarde Offers Little Reprieve for the Euro
The euro has seen little support from the European Central Bank (ECB) or its president, Christine Lagarde.
In a recent interview, Lagarde expressed cautious optimism about inflation, noting that while the numbers are “relatively reassuring,” it’s too soon to say that the inflation fight is over.
Her comments left investors unimpressed, as they did little to inspire confidence in the euro’s short-term prospects.
Lagarde’s upcoming speech on the European economic outlook at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) could provide further insights.
If she acknowledges the region’s worsening growth prospects, it could add more downward pressure on the euro, which has already been struggling to attract demand.
The euro remains vulnerable to further declines as technical indicators point to continued bearishness. With the US dollar showing no signs of weakening amid rising yields and political uncertainty, the outlook for EUR/USD remains skewed to the downside.
Also Read: Forex Market Sees Key Dollar Moves as EUR/USD, USD/JPY, and AUD/USD React to Monday’s Volatility
