EUR/USD tumbles amid USD strength eyes on UST auction, CPI

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  • The EUR/USD trades near the 1.0750 level, suffering minor losses of 0.20%.
  • Ahead of the US 10-year bond auction, US bond yields are rising, pushing the pair lower.
  • Markets await the US CPI figures from November.

In Monday's session, the EUR/USD pair is experiencing a downturn, currently trading around the 1.0745 mark. The downward trend is primarily fueled by robust labor market figures from the US reported on Friday, instigating investors to gravitate toward the Greenback ahead of Wednesday's Federal Reserve (Fed) decision. Market participants are also keeping a keen eye on the upcoming US Treasury auction, which might provide further traction to the bond yields. 

The latest data from the US Bureau of Labor Statistics showed an uptick in November's Average Hourly Earnings, with a 0.4% MoM rise, outpacing the anticipated 0.3% growth and surpassing the prior 0.2% gain. Additionally, US Nonfarm Payrolls unexpectedly leaped to 199K in November, topping its preceding 150K count and the projection of 180K, combined with a drop in the Unemployment rate to 3.7% from the previous 3.9%.

In that sense, the strong labor figures pushed the US Dollar and American bond yields higher as the Fed's dovish narrative seemed to be put into question. In the meantime,  the 2-year rate is trading at 4.75%, while the 5 and 10-year yields are trending at around 4.25%. A rise in these yields typically bodes well for the USD, so the Shared Currency edged downwards.

In addition, investors will keep an eye on the UST bond auction at 18:00 GMT as supply from Treasury auctions, totaling $108 billion in 3-year, 10-year, and 30-year securities, could drive yields up.

On Tuesday, the US is set to release inflation metrics, carefully watched by investors for potential impact on the USD and expectations on the next Fed decisions. The headline Consumer Price Index (CPI) from November is seen declining to 3.1% from 3.2% YoY, while the Core Measure is seen remaining sticky at 4% YoY.

EUR/USD levels to watch

The Relative Strength Index (RSI), with its negative slope and position in negative territory, illustrates a dominance of selling pressure further reinforced by the rising red bars of the Moving Average Convergence Divergence (MACD), indicating increasing bearish momentum. 

Meanwhile, the pair's position in relation to its Simple Moving Averages (SMAs) continues to provide crucial insight. Remaining below the 20, 100, and 200-day SMAs suggests that bearish pressure is not only prevalent but also seen in the larger time frames.

Support Levels: 1.0700,1.0680,1.0650.
Resistance Levels: 1.0760 (100-day SMA), 1.0800, 1.0850.

EUR/USD daily chart



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