Euro Trades Near One-Month Peak Amid Plunging US Treasury Yields, Dollar

Key Takeaways:

• Euro is up near one-month peak as traders prepare for ECB policy meeting
• US Dollar is getting crushed as bets on halting or trimming interest rates increase
• Daily swing chart shows the main trend for EUR/USD is up

The Euro is higher late in the session on Monday, near a one-month peak, as traders prepared for Thursday’s European Central Bank (ECB) policy meeting. Expectations call for the ECB to deliver a 50-basis point rate hike. Traders are not worried about this rate hike, but they aren’t sure how hawkish the ECB will be, with some analysts saying the central bankers will signal more rate hikes to come.

At 19:00 GMT, the EUR/USD is trading 1.0736, up 0.0096 or +0.91%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $99.07, up $0.91 or +0.93%.

Treasury Yields, US Dollar Getting Crushed

In the U.S., bets that the Federal Reserve will halt or trim its raising interest rates to curb inflation after U.S. authorities moved to limit the fallout from the sudden collapse of Silicon Valley Bank weighed heavily on the greenback.

With investors short government bonds and notes because of monetary tightening, the big shift in rate expectations is triggering a tremendous plunge in yields. The two-year note’s yield plummeted 50.8 basis points to 4.080% in the biggest one-day drop since the financial crisis of 2008. The note is on track for its biggest three-day decline since the Black Monday stock market crash of 1987.

Fed funds futures also tumbled, with expectations of the Fed’s terminal rate sliding to 4.05% in December from above 5% on Friday. Additionally, the market is already pricing in a cut again in the fourth quarter.

Daily EUR/USD Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0524 will change the main trend to down.

The minor trend is also up. A trade through the 1.0804 minor top could trigger an acceleration to the upside.

The nearest support is a long-term 50% level at 1.0661. The closest resistance is a 50% level a 1.0783, followed by a long-term 50% level at 1.0943.

Daily EUR/USD Technical Forecast

Look for a bullish tone into the close on Monday as long as the EUR/USD can stay above 1.0661. The daily chart suggests there is room to the upside with 1.0783 – 1.0804 the next target. The latter is a potential trigger point for an acceleration into 1.0943.