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EUR/USD Drops Below 1.1000 as Hawkish Fed Bets Boost U.S. Dollar

ByAlex Boltyan
Published 04/17/2023, 04:23 PM
Updated 07/09/2023, 06:32 AM

The EUR/USD pair retreated for a second straight day on Monday, sliding below the crucial 1.1000 level. Despite the lack of significant data releases, the US dollar remains strong against its competitors, thanks to bullish bets on the Federal Reserve.

At the time of writing, the EUR/USD pair is trading at 1.0923, 0.63% below its opening price, while the DXY Index is trading at the 102.10 area, recording a 0.54% daily gain.

Fed officials have been hitting the wires, boosting hawkish expectations and US yields. The WIRP tool shows that the odds of a 25 bp hike in May rose to nearly 90% from around 70% a week ago. At the same time, small odds of another 25 bp hike in June are back on the table. Against this backdrop, the 10-year note yield rose to 3.60%, the highest level since late March, while the 2-year rate climbed to 4.20%.

Caution among investors is also helping the greenback, pushing Wall Street indexes into the red at the beginning of the week. However, equities managed to rebound and closed on positive ground. By the closing bell, the S&P 500 gained 0.33%, the Dow Jones Industrial Average rose 0.30% and the Nasdaq Composite 0.28%.

 EURUSD Daily Chart
From a technical perspective, despite recent correction from one-year highs, the shared currency maintains its bullish bias on the daily chart. Indicators have turned lower but remain above their midlines while the price hovers above its main moving averages.

The following support level is seen at the 20-day SMA at 1.0890, followed by the last week’s lows at the 1.0830 area. On the other hand, if the bulls regain momentum, the following resistance levels could be found at 1.1000 and 1.1030 ahead of the one-year peak of 1.1075.

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