- The benchmark US 10-year yield rose above 5%, its highest since July 2007.
- The significant fluctuation in yields is happening amid increasing geopolitical risks.
- Traders expect the release of the flash purchasing managers’ index (PMI).
Following its impressive climb to a one-month peak against the dollar on Monday, driven by the fall in Treasury yields, the EUR/USD outlook remains optimistic. Meanwhile, investors are awaiting crucial US economic data before the Fed’s monetary policy meeting next week.
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Last week’s dollar strengthening followed remarks by Fed Chair Jerome Powell. He suggested that the strong US economy might justify tighter financial conditions. Additionally, these remarks pushed the benchmark 10-year yield above 5%, its highest since July 2007.
Notably, the significant fluctuation in yields is happening amid global uncertainty and increasing geopolitical risks. There is uncertainty regarding the Middle East following Hamas’ attack on southern Israel on October 7.
However, the focus now shifts to some of the last pieces of US economic data before the Fed’s meeting scheduled for October 31 – November 1. This includes the release of the flash purchasing managers’ index (PMI) on Tuesday. Moreover, there will be reports on gross domestic product and another inflation report later in the week.
Matt Simpson, senior market analyst at City Index, noted that the PMI data could influence market expectations before the GDP report. He mentioned, “If the data strongly leans one way, it could trigger a significant rally in the dollar or a decline.” Market participants expect the Fed to maintain its rates at the upcoming meeting.
Moreover, investors expect the European Central Bank to keep rates unchanged at its meeting on Thursday.
EUR/USD key events today
Investors are expecting just one report from the US.
- The S&P Global Services PMI for October.
EUR/USD technical outlook: Bulls are closing in on the 1.0700 resistance.
The EUR/USD price is rallying toward the 1.0700 resistance level. The price trades well above the 30-SMA, showing a steep bullish move. The RSI is pulling back after getting overbought, a sign of extreme bullish momentum.
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The price shot up after breaking out of consolidation. It had traded within the 1.0525 support and the 1.0600 resistance levels for some time. The rally came after bulls broke above the 1.0600 resistance level. Currently, the price is retracing. However, the bullish bias remains strong. Therefore, bulls might soon touch the 1.0700 resistance.
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