EUR/USD consolidates losses near 1.0730

• EUR/USD trades neutral at the 1.0725 level, with mild gains.
• US and German yields are sharply rising, contributing to the strength of both currencies.

The EUR/USD consolidated Tuesday’s losses, which saw the pair losing more than 0.60%. The Shared Currency’s movements were driven mainly by a broad-based USD and EUR strength against their rivals on the back of higher US and German yields.

The US reported that the ISM Services PMI from the US from August increased to 54.5, higher than the 52.5 expected and the previous 52.7, and that outcome boosted hawkish bets on the Federal Reserve (Fed). After a mixed Nonfarm Payrolls report released last Friday, which made investors refrain from betting on one last hike, the CME FedWatch Tool now indicated that swaps markets are discounting higher odds of a 25 basis point (bps) increase in November. 

The US also reported the Fed Beige Book, highlighting that the economy “modestly” grew in July and August and that the job growth was subdued.

On the Euro’s side, the European Central Bank’s (ECB) Governing Council will meet next week, and there are growing expectations that a 25 basis point (bps) hike will be announced. Analysts at Danske Bank pointed out that the persistently high inflation will be the main driver of the decision, which is expected to be the last hike of the cycle. In that sense, those expectations seem to keep the European currency afloat via rising German yields.

EUR/USD Levels to watch

The daily chart flashes signals of a bearish outlook for the short term for the EUR/USD. Regarding indicators, the Relative Strength Index (RSI) resides below its midline in negative territory, exhibiting a southward trajectory. At the same time, the Moving Average Convergence Divergence (MACD) prints red bars, underscoring the growing bearish momentum. Additionally, the presence of selling momentum is seen on the four-hour chart, with both indicators residing deep in negative territory.

On the bigger picture, the pair now resided the 20,100 and 200-day Simple Moving Averages (SMA) for the first time since November 2022, pointing out that the bears are in control.

 Support levels: 1.0700, 1.0680, 1.0650.

 Resistance levels: 1.0800, 1.0820 (200-day SMA), 1.0850.

 EUR/USD Daily Chart