EUR/USD puts 1.0500 to the test, focus on Yellen

EUR/USD has come under renewed selling pressure today, dropping to fresh lows in the boundaries of 1.0500 the figure.

EUR/USD offered after US data

Spot stays well into the negative territory this week, so far retreating for the third session in a row and opening the door to a potential visit of last week’s lows in sub-1.0500 levels.

On the opposite side, buying orders around the buck seem to do nothing but piling up as expectations of a rate hike by the Federal Reserve at its meeting later in the March stay on the rise. Currently, the probability of higher rates to be announced on March 15 is above 76% according to agency Reuters and based on Fed Fund futures prices.

USD found extra support today after US Initial Claims rose 223K WoW (lowest in 44 years), taking the 4-Week Average to 234.25K from 240.50K.

Collaborating with the pair’s sharp sell off, recent comments from Fed speakers have lifted US yields, adding to the view of a stronger buck in the near term. In fact, New York Fed and permanent FOMC voter W.Dudley said earlier in the week that the case for further tightening has become ‘compelling’, while Dallas Fed R.Kaplan noted that the next rate hike would come ‘in the near future’.

EUR/USD levels to watch

At the moment the pair is losing 0.30% at 1.0515 and a breach of 1.0508 (low Mar.2) would open the door to 1.0492 (low Feb.22) and finally 1.0452 (low Jan.11). On the flip side, the next hurdle lines up at 1.0594 (55-day sma) followed by 1.0619 (20-day sma) and then 1.0632 (high Feb.28).