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Jun 26 - 02:36 PM
EUR/USD - COMMENT-EUR/USD Hamstrung By Fed Rate Cut Temperance
First appeared on eFXplus on Jun 26 - 10:10 AM

EUR/USD is making a run lower, toward support at the 200-DMA by 1.1346 after putting in a three-month high on Tuesday by 1.1412.
The impetus for the recent bout of dollar weakness had been the increasingly dovish outlook delivered by the Fed after last Wednesday's rate hold, allowing the euro to rally from 1.1187 to recent highs above 1.1400.
Current EUR/USD weakness after Fed members Powell and Bullard dialed back uber-dovish sentiment may hint that further USD weakness may be more of a grind.
With the Fed tempering its own dovish tilt , the front-end of the U.S. yield curve is steepening slightly, with white and red Eurodollar contracts -3bps (higher yield) with and blue contracts down only a basis point. That hints that markets may shift some of their lower-rates expectations further out the short end of the curve.
It's also widened U.S.-euro zone bond yield spreads, stalling EUR/USD strength.
The recent high at 1.1412 may signal a trend top as traders await further data from the euro zone, which may prod the ECB to eye increased accommodation of its own.
A EUR/USD break below the 200-DMA would put the 10-DMA at 1.1291 and daily cloud top at 1.1279 back in focus.

EUR Chart: Click here

ED-Euribor rate strips: Click here

Refinitiv IFR Research/Market Commentary


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