The EUR/USD is falling sharply for the third day in a row on Monday, hitting its lowest level in a month at 1.0403 as the dollar rallies across the board amid higher U.S. yields.
U.S. Treasury yields climbed to their highest levels in over a decade on Monday, while part of the curve inverted in the aftermath of U.S. Consumer Price Index data. The United States 10-Year rate reached a peak of 3.44%.
On Friday, data showed the U.S. inflation rate rose to 8.6% in May – its highest level in 41 years – which slammed expectations of prices beginning to cool off and raised prospects the Fed should continue on its aggressive tightening path.
The Federal Reserve will conclude its two-day meeting on Wednesday. While expectations favor a 50 bps hike this month, some analysts are now calling for a 75 bps increase following the CPI figures.
The greenback has soared across the board, dragging the EUR/USD back to test the 1.0400 area. The DXY, which measures the dollar versus a basket of currencies, reached its highest level in almost 20 years at 105.28 on Monday.
From a technical perspective, the EUR/USD holds a bearish tone according to the daily chart. Indicators are in negative territory, without reaching oversold levels just yet. The RSI has gained a steep negative slope, while the MACD prints bigger red bars, pointing to increasing selling interest.
The loss of the 1.0400 psychological level would expose the 2022 lows at 1.0348 and then 1.0300. On the other hand, the EUR/USD needs to recover the 20-day SMA, currently around 1.0650, to ease the short-term bearish pressure and move toward 1.0700.
