EUR/USD Price Analysis: Dollar Weakness Lifts Euro by 0.1%

  • The dollar weakened as US interest rate expectations dropped while Treasury yields fell.
  • The euro saw a 0.1% increase in early Asian trade.
  • The probability of another Fed rate hike this year fell to approximately 26% on Monday.

The EUR/USD price analysis is bullish as the dollar weakened. US interest rate expectations dropped, leading to a fall in Treasury yields.

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Investors believe there has been a slight shift towards dovishness in the tone of Federal Reserve officials. The euro saw a 0.1% increase in early Asia trade, reaching $1.0580. Meanwhile, investors are preparing for a prolonged conflict following a weekend attack by Palestinian militants. Consequently, the attack led to Israel’s retaliation and claimed over 1,500 lives.

However, the sentiment shifted due to comments from two Fed officials overnight. They pointed out that the recent bond sell-off might eliminate the necessity for further interest rate hikes. Dallas Fed President Lorie Logan stated, “If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the Fed funds rate.” This marks a significant departure from previous hawkish statements.

Similarly, Fed Vice Chair Philip Jefferson emphasized the need for caution given the recent rise in yields. Moreover, the implied probability of another Fed rate hike this year, as reflected in futures pricing, fell from over 40% last week to approximately 26% on Monday. 

CBA strategist Carol Kong noted that several other officials, including Fed Governor Christopher Waller, will speak today. Therefore, the market will closely monitor their remarks for additional insights into Fed policy.

EUR/USD key events today

Investors await key reports from the US that include:

  • The PPI report.
  • The FOMC meeting minutes.

EUR/USD technical price analysis: A break beyond 1.0600 might kickstart a bullish trend.

EUR/USD technical price analysis
EUR/USD 4-hour chart

The EUR/USD price is bullish, with the price above the 30-SMA and the RSI in bullish territory. Moreover, it trades with the nearest support at 1.0500 and the nearest resistance at 1.0600. Bulls took charge when the price broke above the 1.0500 key level and the 30-SMA resistance.

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The price later confirmed the new bullish sentiment when it retested and got rejected below the 30-SMA. Currently, the price is climbing and might soon retest the 1.0600 resistance level. A break above this resistance level could start a bullish trend.

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