EUR/USD pushing against 2021 low at 1.1665

• The euro loses ground against the dollar to test YTD low at 1.1665.
• Higher US yields and a dovish ECB are weighing on the EUR.
• FX analysts at Rabobank anticipate a further drop towards 1.1600.

The euro is losing ground for the third consecutive day on Tuesday, reaching levels only a few pips above August 20 low at 1.1663. A stronger USD on the back of higher US bond yields and the surging gas prices in Europe are weighing heavily on the common currency.

The euro suffers against a stronger US Dollar

The US bond yields’ positive trend, with the benchmark 10-year note rallying beyond 1.5% for the second day in a row has increased the greenback’s attractiveness for the investors. The Federal Reserve’s signals towards the end of the Quantitative Easing era are pushing US yields higher.

In Europe, the energy crisis, with gas prices surging and with inventories at historical lows is casting doubt about the post-pandemic recovery in the region. Beyond that, ECB’s commitment to the current accommodative stance adds negative pressure on the euro.

EUR/USD: Below 1.1664, next target will be 1.1600 – Rabobank

The Rabobank FX Analysis Team sees the pair under pressure amid the ECB’s dovish policy and the uncertain regional growth prospects: “Given that the prospect of a Fed funds rate at the end is live in the market and given growth concerns in emerging markets, our six-month EUR/USD target of 1.16 looks set to be hit sooner than we had been anticipating.”

Technical levels to watch