EUR/USD hit a 26-session high on Thursday as falling U.S. rates softened the dollar, and downbeat U.S. data combined with Fed and ECB expectations could push for a test of the 1.0500 area.
A raft of data recently has raised concerns over the U.S. economic outlook, fueling expectations that the Fed will temper its hawkish stance.
Data showing the U.S. trade deficit widened in September nL1N31Q28L added to that picture, with the shortfall unlikely to diminish without a dollar retreat.
Mortgage rates also hit a 21-year high nL1N31R0VL, which could increase downward pressure on already weakening U.S. housing data.
An inversion of the 3-month-10-year Treasury spread -- a favorite of the Fed -- for the first time since February 2020 and deepening inversion of 2s-10s reflect recession fears, potentially tempering U.S. monetary policy and the dollar.
Futures reinforce EUR/USD upside risks, with Eurodollars indicating Fed rates rate will peak in Q1 2023 EDH3 while Euribors project ECB rates rising until Q3 2023.
Technicals highlight upside risks.
Monthly RSI turned up from oversold territory, daily RSI isn't overbought and EUR/USD is holding above the 10- and 21-day moving averages.
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