We’re seeing a broad wave of selling in the dollar now as the retreat this week continues to play out. The greenback is struggling amid a shove lower in bond yields, with 10-year Treasury yields down another 5 bps today to 4.058%. For some context, yields peaked at 4.335% at the end of last week.
This is seeing a notable push in dollar pairs with EUR/USD also rising back up to parity for the first time since 20 September. It’s a big level for the pair now with large option expiries also in play at the key level all before the ECB pulls the trigger tomorrow.
The latter will be a massive risk event for the pair and will be part of the consideration amid the prevailing dollar sentiment at the moment.
Looking at the technicals, EUR/USD
EUR/USD
The EUR/USD is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the dollar of the United States (symbol $, code USD). The pair’s rate indicates how many euros are needed in order to purchase one dollar. For example, when the EUR/USD is trading at 1.2, it means 1 euro is equivalent to 1.2 dollars. Why the EUR/USD is the Most Popular Trading PairCompared to all tradable currencies, the euro (EUR) is the world’s second most traded currency, behind only the US dollar. This currency pair is the most traded and liquid currency pair on the market.As the most popular trading pair, the EUR/USD is a staple of every brokerage offering and often has some of the lowest spreads relative to other pairs. Ultimately, the currency follows the two most economic blocs in the world and sees the most volume for this reason.The EUR/USD has a wide range of factors that influence its rates. From the EUR side, economic data in the Eurozone as well as internal factors in the bloc can easily impact rates. Even small member states can effectively weigh on the EUR, as seen in Greece during bailout talks in the 2010s. Alternatively, developments in the United States and the Federal Reserve commonly affect the EUR/USD. Many examples include the bailouts during the Financial crisis, tax cuts during the Trump Administration, and Covid-19 relief measures, among others.
The EUR/USD is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the dollar of the United States (symbol $, code USD). The pair’s rate indicates how many euros are needed in order to purchase one dollar. For example, when the EUR/USD is trading at 1.2, it means 1 euro is equivalent to 1.2 dollars. Why the EUR/USD is the Most Popular Trading PairCompared to all tradable currencies, the euro (EUR) is the world’s second most traded currency, behind only the US dollar. This currency pair is the most traded and liquid currency pair on the market.As the most popular trading pair, the EUR/USD is a staple of every brokerage offering and often has some of the lowest spreads relative to other pairs. Ultimately, the currency follows the two most economic blocs in the world and sees the most volume for this reason.The EUR/USD has a wide range of factors that influence its rates. From the EUR side, economic data in the Eurozone as well as internal factors in the bloc can easily impact rates. Even small member states can effectively weigh on the EUR, as seen in Greece during bailout talks in the 2010s. Alternatively, developments in the United States and the Federal Reserve commonly affect the EUR/USD. Many examples include the bailouts during the Financial crisis, tax cuts during the Trump Administration, and Covid-19 relief measures, among others. Read this Term faces key resistance closer to the 100-day moving average (red line) at 1.0092 should it push past parity with the 12 September high near 1.0200 the next region to watch thereafter.
As much as the pair is looking for a solid bounce, the key still lies with the Fed and unless the status quo changes or the Fed resolve is seen as weakening next week, I would argue that sellers will come back in should we start to run into the key levels above.
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