EUR / USD tests 1.1700 as USD extends strength along with yields

• EUR / USD looks for a break below 1.1700 as USD strengthens alongside rising Treasury yields.
• Vaccine problems and the increase in covid cases in Europe continue to put pressure on the euro.
• Hopes that US infrastructure stimulus will keep yields underpinned, the focus is on the eurozone CPI and Biden’s speech.

EUR / USD has tumbled to test the 1.1700 region, hitting the lowest levels since early November 2020, as the US dollar follows the rally in Treasury yields along the curve.

US Treasury Yields Continue to Rise, in anticipation of a likely stimulus to US infrastructure spending of more than $ 3 trillion that will be presented by President Joe Biden later this Wednesday.

The expectations that the next stage of US fiscal spending would boost economic recovery they raise inflation expectations along with yields. Benchmark 10-year US yields are up nearly 1% to 1.745%, at time of writing, having hit a 14-month high of 1.77% the day before.

Across the Atlantic, it is likely that the continued increase in covid cases and slower vaccination campaigns due to delays in supplies weigh on the economic outlook for the euro area. Therefore, the macroeconomic divergence between the US and the old continent continues to undermine sentiment around the common currency.

Investors, meanwhile, ignore the upbeat mood, fueled by encouraging reports from China’s manufacturing and services PMI, as the pair remains at the mercy of dollar dynamics and market returns.

The pair is now awaiting the release of the Eurozone CPI data and the US ADP jobs report for some short-term trading opportunities ahead of Biden’s highly anticipated speech.

EUR / USD technical levels