EUR/USD inter-markets: downbeat feeling

EUR/USD keeps the bearish fashion during the first half of the week, breaking below the critical 1.10 handle to print fresh 3-week lows and allowing at the same time a potential test of the post-‘Brexit’ trough at 1.0913 ahead of the more relevant area around 1.0820 (March’s low).

Any sustainable bullish attempt appears at the moment unlikely, as the greenback – tracked by the US Dollar Index – is extending its march north, and the pair’s upside seems limited by first, the key 200-day sma around 1.1090, and second, the 1.1190/1.1230 area, where are located the base of the 6-month rising channel and the uptrend off March low.

Today’s USD up move has been sustained by a good performance of US yields and a rising trend in Fed Fund prices, which are currently assigning a probability of a rate hike by the Fed of almost 40% at the December meeting, improving significantly in recent weeks, measured by CME Group’s FedWatch tool.

Volatility in terms of VIX keeps navigating the lower bound of the 2016 range, adding to EUR selling based on its condition of borrowing currency.