EUR/USD trims losses and reaches session highs near 1.1580

• The euro ticks up against a weaker USD and returns to 1.1580.
• The greenback pulls back as the US bond yields' curve flattens.
• EUR/USD remains negative, heading towards 1.1000 – Credit Suisse.

The euro is taking advantage of a somewhat softer dollar on Wednesday to regain lost ground. The pair has bottomed at year-to-date lows at 1.1525 to appreciate about 0.4% on the day, reaching session highs near 1.1580 so far.

The dollar loses ground as the US yield curve flattens

The greenback is trading lower against its main peers on Wednesday, weighed by a flattening US bond yield curve. The benchmark 10-year note has pulled back to 1.57% from levels above 1.6% on Tuesday, while shorter-term yields are building up. The yield of the 2-year Treasury bond has climbed to 0.35%, its highest level in 18 months.

On the macroeconomic calendar, US Consumer Prices have confirmed the inflationary trend observed over the previous months. Consumer inflation accelerated at a 0.4% pace in September, from 0.3% in the previous month while the yearly inflation increased by 5.4%, from 5.3% in August. 

These figures cast doubt on Fed Powell’s theory of “temporary” high inflation pressures, adding pressure on the US central bank to announce QE tapering in November.

EUR/USD remains bearish, targeting 1.1000 – Credit Suisse

The current euro recovery, however, is seen as a mere correction by Credit Suisse’s  FX Analysis team. In a bigger picture, the pair remains heading lower: “EUR/USD is probing the weekly Ichimoku cloud and is close to the peak of March 2020 at 1.1495. Defending this can result in a rebound, however, 1.1665 could cap (…) Below 1.1495, next support could be at 1.1450 and projections of 1.1380 (…) “Whilst we would expect a fresh hold at 1.1290, we continue to see the broader risks skewed to the downside, with support seen next at 1.1020/00.”

Technical levels to watch