- The euro is trying to find support at 1.1535 after losing more than 1% on the day.
- The US dollar appreciates with investors gearing up for the Fed meeting next week.
- Rising US bond yields and optimistic expectations from the Fed have crushed the euro.
The EUR is attempting to bottom at 1.1535 after plummeting more than 1% on the day. The pair EUR/USD it fell like a stone on Friday, crushed by a combination of factors and a stronger US dollar.
The euro plummets with the US dollar strengthening
The common currency lost all the ground it gained on Wednesday and Thursday’s rally on Friday, weighed down by the strength of the US dollar. The month-end moves, as market positions for the Federal Reserve’s monetary policy meeting next week and higher US Treasuries could have been the main reason for the strong reversal of the EUR / USD.
The Bureau of Economic Analysis today revealed that US core personal consumption spending, the Fed’s favorite inflation gauge, accelerated 3.6% year-on-year in September. These figures reinforce the theory that the US central bank will be forced to accelerate its monetary normalization plans, which, less than a week before the November meeting, has boosted demand for the US dollar.
In this context, US Treasury yields rose again, and the 10-year bond reached levels close to 1.6%, which has increased the upward pressure on the US dollar.
EUR / USD: reaching levels just above long-term lows at 1.1525
The euro is rising from session lows just a few pips above the year-to-date lows of 1.1525. With technical indicators approaching oversold levels, the pair could attempt a correction, targeting previous lows at 1.1585 before testing October 26-27 highs at 1.1625 and, if that level subsides, preparing another attack on the zone. of 1.1700.
However, the short-term bias is still quite negative and we should not rule out a further decline next week. In that case, the area between the October low of 1.1525 and the 50% Fibonacci retracement of the March 2020 to January 2021 rally, at 1.1500 represents an important support range that would pave the way to the June highs of 2020 at 1.1420.