EURUSD: Bears remain in control below 1.0100

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  • EURUSD maintains bearish tone in the area below 1.0100.
  • The dollar’s recovery comes amid rising US yields.
  • US inflation and the results of the mid-term elections remain in the spotlight.

The selling bias continues to hurt the European currency and keeps the EURUSD under pressure below the 1.0100 zone on Wednesday.

EURUSD offered for the purchase of dollars

EURUSD falters again just ahead of the key 1.0100 area – where October and November highs so far coincide – and triggers a corrective decline amid some profit-taking mood after three straight sessions of strong gains.

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Furthermore, fresh dollar buying seems to be supported by uncertainty surrounding the results of the US mid-term elections and growing caution ahead of the release of US inflation figures on Thursday.

The pair’s decline is in line with another negative session in German 10yr yields, retreating to 3-day lows near 2.20%. Earlier in the session, the auction for 10-year yields stood at 2.25%.

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On the US economic docket, MBA mortgage applications shrank 0.1% in the week to November 4 and wholesale inventory figures will be released later.

What to watch out for around the EUR

EURUSD is facing some selling pressure near the 1.0100 area amid another dollar rally attempt.

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 Fed’s recent decision to hike rates and the likelihood that it will adopt a long-term tightening stance is now shaping up to be the main headwind to a sustainable recovery for the pair.

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 indicators – adds to the fragile sentiment around the euro in the long term.

Technical levels

At the moment the pair is retracing 0.48% to 1.0022 and a break of 0.9888 (55-day SMA) would target 0.9730 (monthly low Nov 3) on the way to 0.9704 (weekly low Oct 21). On the other hand, initial resistance is located at 1.0096 (Monthly High Nov 8), followed by 1.0197 (Monthly High Sep 12) and finally 1.0368 (Monthly High Aug 12).

Source: Fx Street

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