EUR/USD dropped to a new low of 1.1328 on Thursday as surging US Treasury yields boosted the dollar. Softer PCE inflation data cut the odds of an October Fed rate hike, but stalled US-Iran talks and high oil prices keep inflation risks in place. Technical charts still point lower, with the next targets at 1.1300 and 1.1290-1.1283.
EUR/USD fell to 1.1328 on Thursday, extending its slide as US Treasury yields climbed. The move pushed the pair to its lowest level in the current downtrend.
A sharp rise in Treasury yields is driving the dollar's strength. The 10-year yield holds around 5.3%, while the 30-year sits near 5.64% — both at their highest levels since 2002. There are fears that inflation, driven by expensive energy, will require a tougher Federal Reserve policy.
Oil prices remain elevated. Negotiations between the United States and Iran have yet to produce noticeable progress, despite signs of a recovery in Middle Eastern supplies. That leaves inflation risks firmly in place.
PCE data trims rate hike odds
PCE data released Wednesday came in softer than expected. The headline price index rose 0.3% month-on-month in August against a forecast of 0.4%, while core PCE rose 0.2% against an expected 0.3%. Following the release, the probability of a Fed rate hike in October dropped to approximately 38% from 51%.
Market focus now shifts to Thursday's weekly jobless claims and Friday's September US labor market report.
Technical picture stays bearish
On the H4 chart, EUR/USD continues trading inside a downward channel. The pair ended a decline wave around 1.1313, corrected up to 1.1379, then returned to 1.1330, where it is now consolidating below resistance. The immediate target is 1.1300, with a break lower opening the path toward 1.1290-1.1283. The 1.1355 level stands as the first significant resistance; a return above it could delay the bearish scenario and lead to a retest of 1.1379.
The MACD remains below its zero line, confirming bearish momentum. However, the shrinking negative histogram points to a slowdown in the decline, suggesting the market may form an additional correction or consolidation before resuming its move.
On the H1 chart, the structure confirms continued selling pressure. The Stochastic oscillator sits below the 50 level and is turning downward, indicating short-term momentum toward the oversold zone may continue. The sequence of declining local highs and lows reinforces the bearish structure.
While EUR/USD trades below 1.1330-1.1355, the continuation toward 1.1300 and then 1.1290 remains the priority scenario. A recovery above 1.1355 would be needed to delay that outlook.
Source: ActionForex
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