EUR/USD slid to 1.1368 on Tuesday, sitting near two-month lows as traders price in further Federal Reserve tightening. Rising oil prices tied to US-Iran uncertainty and multi-year-high Treasury yields are adding to the pressure, and the technical picture points to further downside.
Fed bets and Iran tensions squeeze the euro
The pair dropped to 1.1368 on Tuesday, remaining near its two-month low. The dollar is drawing support from expectations of further Fed policy tightening tied to inflationary risks from expensive energy and uncertainty around US-Iran relations.
Oil kept rising after reports that Iranian authorities doubt an agreement can be reached before the US mid-term elections in November. Earlier, Donald Trump rejected Tehran's latest proposal, which heightened fears of a protracted conflict and persistently high energy prices.
Markets now price a 70% chance of another Fed rate hike in October, following the Fed's first rate increase in three years earlier in September. Fed Board member Lisa Cook warned that potential productivity gains from artificial intelligence may not be enough in the near term to offset price pressures, which she said raises the risk that inflation spreads more broadly across the economy.
Yields at multi-year highs, technicals point lower
US Treasury yields also remain at multi-year highs, with 10- and 30-year paper trading above 5%, further supporting the dollar and adding pressure on financial conditions.
On the H4 chart, EUR/USD is consolidating around 1.1360 after forming a second wave near 1.1640. A break below 1.1353 would open the way toward 1.1306, the main target of the current wave. A recovery above 1.1410 could still allow a correction toward 1.1469 without changing the broader downward direction.
On H1, the price returned to support at 1.1353 after climbing to 1.1410. A break below that level would point toward 1.1326 and then 1.1306, while a close above 1.1410 would be needed to shift the short-term picture.
Source: ActionForex
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