EUR/USD slides as Powell’s hawkish stance bolsters US Dollar, US yields surge

• EUR/USD retreats from 1.0725, as Fed Chair Powell’s comments and higher bond yields strengthen the US Dollar.
• Powell’s hawkish shift, emphasizing the need for potentially tighter monetary policy, propels the Dollar Index by over 0.30%.
• The EUR/USD’s technical analysis suggests a continued downtrend, with key levels to watch at 1.0659 and the 50-DMA at 1.0624, while a move above 1.0700 could signal an upward correction.

EUR/USD retreats from daily highs reached at 1.0725, dives some 0.37% as the Greenback was underpinned by hawkish remarks of Federal Reserve Chairman Jerome Powell and elevated US Treasury bond yields following a 30-year bond auction. The EUR/USD is trading at 1.0666.

EUR/USD drops on a hawkish Federal Reserve outlook and a spike in US Treasury yields

Jerome Powell turned hawkish on Thursday, commented they’re not confident the Fed’s monetary policy is sufficiently restrictive, and said they would not hesitate to tighten monetary conditions if needed. Powell said they will carefully decide meeting-by-meeting and adding that inflation remains well above the 2% target despite slowing down.  

Powell’s remarks spurred a jump in US Treasury bond yields of more than 10 basis points along the whole curve, while the American Dollar (USD) climbs as the US Dollar Index is gaining more than 0.30%, up at 105.91.

Data in the United States (US) showed that Initial Jobless Claims in the United States for the week ending November 4, rose by 217K, below estimates of 218K, and last week’s 220K. Even though the data paints a tight labor market, last Friday’s Nonfarm Payrolls report showed the economy added 150K jobs, below forecasts of 180K, while witnessing a jump in the unemployment rate to 3.9%.

Across the pond, recent data from the Eurozone (EU) portrays a stagflationary scenario, with business activity on the manufacturing side and industrial production slowed. Nevertheless, the rise in German yields is capping the EUR/USD recent fall after Powell’s remarks.

What to watch?

A scarce EU economic docket would feature a speech by the European Central Bank (ECB) President Christine Lagarde on Friday. The US calendar will feature the University of Michigan Consumer Sentiment and additional Federal Reserve speakers.

EUR/USD Price Analysis: Technical outlook

The daily chart shows that the EUR/USD downtrend is intact, with the pair testing the week’s lows at around 1.0659. A breach of the latter could drag prices to the 50-day moving average (DMA) at 1.0624, before diving to 1.0600. On the flipside, the major could shift upward, if it reclaims 1.0700, followed by the November 6 high at 1.0756.