- EUR/USD rallies and breaks through 0.9900.
- Dollar remains under pressure as DXY breaks 111.00.
- The ECB’s Lagarde will speak later in the session.
As the dollar accelerates its daily decline, the EUR/USD sharpens its march north and breaks above the key 0.9900 barrier on Tuesday.
EUR/USD is now heading to the parity zone
In fact, the EUR/USD is now navigating the 2-week all-time high zone beyond the 0.9900 barrier, always supported by the weaker tone surrounding the dollar, which seems in turn under pressure on the background of the fall of US yields across the curve.
However, the decline in yields is by no means unique to the US bond market. In fact, 10-year German Bund yields are slipping back to multi-session lows in the vicinity of 1.75% after rising to levels last seen in August 2011 just a few sessions ago.
As for the data in the euro zone -and while market participants wait for President Lagarde-, Producer Prices in the euro zone rose more than expected, 5% month-on-month in August and 43.3% in the last twelve months.
In the US, all attention will be on the release of factory orders and speeches from Logan, Williams, Mester, Jefferson and Daly at the FOMC.
What to watch out for around the EUR
The EUR/USD maintains the strong recovery with the renewed objective in the 0.9900 area, always against the background of the sharp fall in the dollar.
Meanwhile, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the divergence between the Fed and the ECB. The latter has been further exacerbated by the latest Fed rate hike and the persistent hawkish message from Powell and the rest of his rate-setting counterparts.
In addition, growing speculation about a possible recession in the region – which seems to be underpinned by the decline in sentiment indicators, as well as the incipient slowdown in some fundamental variables – adds to the sour sentiment around the euro.
Technical levels
So far the pair is gaining 0.95% at 0.9918 and the break of 0.9934 (weekly high Oct 3) would target 1.0032 (55-day SMA) on the way to 1.0050 (weekly high Sep 20). On the other hand, next support appears at 0.9535 (28 Sep low) ahead of 0.9411 (weekly low Jun 17, 2002) and finally 0.9386 (weekly low Jun 10, 2002).
Source: Fx Street
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