EUR/USD fell to a new 3-1/2-month low Tuesday, failing to benefit from a rebound in U.S. equity markets, and faced the possibility of a further slow grind lower.
Spread of the coronavirus Delta variant has left investors nervous about global growth, which the euro zone is highly dependent on.
Those concerns are driving the global interest rate complex lower.
German 2-year yields DE2YT=RR had their largest percentage drop in 9-months while 10-year yields DE10YT=RR fell to a 5-month low.
Rallies in Euribor prices FEIH3 indicate investors are pushing out ECB rate hike expectations.
Options reinforce the grind-lower scenario.
EUR/USD vol premiums for puts slightly exceed those for calls, which indicate options investors are leery of downside risks but don't expect a sharp move down.
Commodities could contribute to EUR/USD's downside risks.
Oil's LCOc1 slide from its July 6 peak extended to a 2-month low on Tuesday after the recent OPEC+ agreement nL1N2OU04R to increase supply.
Technicals continue to highlight downside risks.
The falling 10-day moving average continues to exert bearish influence as it helps stall rallies.
Daily and monthly RSIs are falling, are not oversold and indicate downside momentum is intact.
EUR/USD remains on track to test 1.1700 and possibly beyond to the November 2020 low at 1.1602.
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