- The euro loses ground against the dollar to test the yearly low at 1.1665.
- Higher US yields and a dovish ECB are weighing on the EUR.
- Rabobank currency analysts anticipate a further decline towards 1.1600.
The euro is losing ground for the third day in a row on Tuesday, reaching levels just a few pips above the August 20 low of 1.1663. A stronger USD due to rising US bond yields and rising gas prices in Europe are weighing heavily on the common currency.
Euro Suffers Against Stronger US Dollar
The positive trend in US bond yields, with the 10-year yield rising beyond 1.5% for the second day in a row, has increased the attractiveness of the dollar for investors. Signals from the Federal Reserve towards the end of the quantitative easing era are driving US yields higher.
In Europe, the energy crisis, with gas prices on the rise and inventories at record lows, is calling into question the post-pandemic recovery in the region. Beyond that, the ECB’s commitment to the current accommodative stance adds negative pressure on the euro.
EUR / USD: below 1.1664, next target will be 1.1600 – Rabobank
Rabobank’s currency analysis team sees the pair under pressure amid dovish ECB policy and uncertain regional growth prospects: “Since the prospect of a Fed funds rate is ultimately alive in the market and given growth concerns in emerging markets, our six month EUR / USD target of 1.16 looks set to be reached earlier than we had anticipated. “
Technical levels
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