Euro Under Pressure as Rising U.S. Yields Weigh on EUR/USD

Key Moments

Dollar Strength Drives EUR/USD Lower

The Euro is trading weaker against the U.S. Dollar on Thursday, with EUR/USD down 0.16% around 1.1310 during the European session. The pair remains under downside pressure as the U.S. Dollar strengthens in tandem with a sharp move higher in U.S. Treasury yields.

Dollar Performance Against Major Currencies

The U.S. Dollar has advanced against its major counterparts, with the Japanese Yen underperforming the most. Intraday price action shows USD/JPY higher by 0.46%, highlighting the Dollar’s relative strength in the current session.

A currency heat map tracks percentage changes among the main currencies – USD, EUR, GBP, JPY, CAD, AUD, NZD, and CHF. In this framework, the base currency is selected from the left column, while the quote currency is chosen from the top row. For instance, by selecting the U.S. Dollar on the left and moving horizontally to the Japanese Yen, the figure displayed reflects the percentage change in USD (base) against JPY (quote).

U.S. Dollar Index and Treasury Yield Surge

The U.S. Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is trading close to its yearly peak of 101.80. At the same time, 10-year U.S. Treasury yields have climbed to a new high near 5.30%, a level described as the strongest in two decades.

This rise in yields has occurred even though the latest U.S. Personal Consumption Expenditures (PCE) inflation data for August indicated only moderate growth in price pressures.

Market Interpretation of PCE and Growth Data

TD Securities characterizes the recent PCE and GDP revision releases as “a mixed bag,” citing “hawkish backward adjustments to growth and dovish adjustments to inflation.” The firm emphasizes that “the underlying trend is the key story,” describing it as “robust growth with rising inflation risks” that is likely to “continue to dominate the Fed’s outlook.”

Against this backdrop, TD Securities notes, “we still expect the Fed to lift rates in October, but can’t discard a more gradual approach.”

Euro Faces Headwinds Despite German Inflation Surprise

The Euro remains under pressure even after preliminary German Harmonized Index of Consumer Prices (HICP) data for September exceeded expectations. The currency has not been able to capitalize on the stronger German inflation print, as U.S. Dollar strength and higher U.S. yields dominate the broader market narrative.

Looking ahead, attention shifts to the flash Eurozone HICP release for September, scheduled for Friday, which may influence expectations for Eurozone inflation dynamics and the common currency.

EUR/USD Technical Setup: Bearish Bias Intact

On the daily chart, EUR/USD trades at 1.1314, maintaining a clearly bearish near-term tone as the pair remains below the 20-period exponential moving average (EMA) at 1.1448. The ongoing move away from that EMA resistance indicates that sellers are firmly in control.

The Relative Strength Index (RSI) stands at 21.8, reflecting oversold conditions that could slow the pace of further losses. However, this reading does not yet indicate a durable rebound as long as the price stays capped beneath the short-term trend marker.

On the upside, the June 24 low at 1.1325 is identified as immediate resistance. Above that, the 20-period EMA at 1.1448 represents the next key hurdle and the first level that would need to be reclaimed to alleviate the current bearish momentum.

On the downside, selling pressure may intensify if EUR/USD falls through the 1.1300 threshold. Below that, the 1.1200 area is highlighted as the next major support level.

Key EUR/USD Technical Levels