EUR/USD erases gains as US dollar recovers some strength

• US Dollar Index back to 100.00, down for the day but off lows.
• Euro weakens and retreats versus USD, CHF and GBP.

The EUR/USD failed to break 1.0860 and pulled back. It is trading at 1.0819, the lowest since the Asian session as the greenback recovers ground across the board.

The bearish pressure on the US Dollar eased amid higher US yield. The 10-year hit 0.65%, the highest level since April 17. The improvement in risk sentiment is pushing yields and equity prices higher. In Wall Street, the Dow Jones is up 1.15% and the Nasdaq 1.05%.

Volatility continues to slide. The VIX Index is at the lowest since mid-April, helping market sentiment. A rebound seems likely ahead considering the economic calendar for the week that includes the European Central Bank and Federal Reserve monetary policy meetings. “We still think markets are likely to focus more on the details and the discussions of CV-19 exit strategies, leaving broader risk sentiment as the primary driver. Still, the ECB should garner the most interest, reflecting the renewed focus on EZ political economy fragmentation and the need to backdrop BTP yields”, explained analysts at TD Securities.

Short-term technical outlook

The intraday outlook has turned bearish after EUR/USD dropped below the 20-hour moving average (currently at 1.0835, now immediate resistance). On the downside, the next support stands at 1.0810/15, followed by 1.0785.

A recovery above 1.0840 would add momentum to the euro. The critical resistance stands at 1.0860, and a break higher should clear the way for a test of 1.0880 and 1.0900.

Technical levels