EUR/USD Drops as Yields Drive Dollar Higher


EUR/USD dropped lower hitting a fresh low of 1.1155, extending Monday dollar-driven decline in the wake of hawkish remarks from Fed’s Bullard and, to a lesser extent, Lacker. Bullard, presently a non-FOMC voter, said that there is a “powerful case to be made” for rate lift-off. This contrasted with ECB’s Praet, who said in remarks after the European close that the central bank would “forcefully” react should the inflation environment worsen.

The in-action of the Fed creates a bearish case for EUR/USD, despite the Fed’s relatively dovish guidance, as the dollar has yield advantage, particularly at the long end, and with the ECB likely to counter any euro strength with its own dovish guidance. Prices slashed through an upward sloping trend line and will likely target support is at 1.1125, which corresponds with the 50-day moving average. Resistance is seen near the 20-day moving average at 1.1243.

Momentum has turned negative with the MACD (moving average convergence divergence) index generating a sell signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.

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Source:: EUR/USD Drops as Yields Drive Dollar Higher

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