EUR/USD extended its overnight retreat from near 1.1770 levels into Asia, as the bears look to test 1.1700 levels ahead of the German CPI and US GDP figures.
EUR/USD: Aug lows of 1.1662 still on sight
Despite several recovery attempts above the mid-point of 1.17 handle, the EUR/USD pair continues to revert south, as risks remain tilted to the downside amid rising Fed rate hike expectations, with the CME FedWatch Tool showing a Dec hike probability standing at 76%.
The odds for a Dec rate hike were boosted after Yellen noted on Wednesday, ‘the Fed should be wary of moving too gradually ‘, implying that the pace of rate increases might potentially be faster than anticipated.
Moreover, the sentiment around the US dollar and Treasury yields remains lifted amid revival of Trump reflation trades, as markets hope some fiscal progress with the corporate tax rate proposed at 20% from 35%.
Meanwhile, on the EUR-side of the story, the German CPI numbers will hold the key today, as the ECB President Draghi continues to remain worried over the inflation prospects. Also, of note for the major will be the US final GDP and jobless claims data that will be released ahead of the Fedspeaks.
EUR/USD Technical Set-up
Valeria Bednarik, Chief Analyst at FXStreet, explained: “Technically, the pair is still poised to extend its downward move as the intraday attempt to recover ground was contained by selling interest around former support in the 1.1770 region, now the immediate resistance, A break below the mentioned daily low, should result in a test of 1.1661, August monthly low, while beyond this last, the pair could continue falling towards a major long term support at 1.1460. Support levels: 1.1715 1.1690 1.1660 Resistance levels: 1.1775 1.1810 1.1850.”
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