EUR/USD rallied to a 7-session high Tuesday with help from lower U.S. yields driving broad based dollar sales, and the potential to extend gains has increased following dovish Fed rhetoric that could tighten spreads.

Fed policymakers have nodded to the effect of rising long-term yields as a factor that could result in a more cautious monetary policy approach.

Atlanta Fed President Raphael Bostic, a voter in 2024, said the Fed doesn't need to raise rates further, which helped keep U.S. yields lower.

The dollar's yield advantage over the euro eroded as a result of the rhetoric and yield moves.
German-U.S.
2-year US2DE2=RR and 10-year US10DE10=RR tightened which helped underpin EUR/USD.

The prospect of additional stimulus in China to support economic growth may be providing a bit of a tail wind for the euro as well.
Economic growth in China would be a positive impact on the euro area economy as it is dependent upon China.

EUR/USD's recent rally is near key 1.0610/60 resistance, a break of which could trigger a short squeeze.

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