EUR/USD jumps to three-week highs near 1.1650 amid falling dollar, yields

• EUR/USD catches fresh bids in early Asia after finding support near 1.1610.
• The pair cheers risk-on mood-led decline in the USD, Treasury yields pullback.
• Focus on ECB and Fedspeak as poor US data tempers hawkish Fed’s expectations.

Fresh bids emerged near 1.1610 in early Asia, triggering a fresh upswing in EUR/USD towards 1.1650, as the US dollar runs into fresh supply amid the risk-on market mood.

The Asian markets cheer the Wall Street tech advance amid prospects of robust corporate earnings reports, which cooled off concerns over rising inflationary risks and thier impact on the economic recovery.

The retreat in the US Treasury yields and a pause in the yield curve flattening, in the face of disappointing American Industrial Production data, add legs to the recovery momentum in the main currency pair.

However, the divergent monetary policy outlooks between the Fed and the European Central Bank (ECB) could likely pose a downside risk to EUR/USD’s further upside. The Fed is well on track to withdraw the pandemic stimulus as early as November while the ECB calls for keeping a high degree of flexibility in the post-crisis stimulus measures.

 “I think flexibility should remain -- we certainly have to discuss how to adjust our purchase programs,” ECB policymaker Ignazio Visco said on Monday.

In the day ahead, the pair will remain at the mercy of the US dollar price action and the risk trends amid a data-light economic calendar. The speeches from the ECB and Fed policymakers will hog the limelight.

EUR/USD: Technical levels to consider