As US Yields fall, spreads narrow via other currencies and the yield curve steepens the USD is coming under pressure.
On EURUSD we are now testing pivotal resistance at 1.0916 off which we posted a 76.4% pullback in June. A close above here would suggest an acceleration to the upside.
At the same time the close over 1.0886 on Friday completed an inverted head and shoulders that suggests a target of around 1.1240 with interim resistance at 1.1012 and 1.1139. This as US-German spreads from 2-10 year narrow in what could be double top formations. IF so the target on the 10-year spread suggests a fall as low as 130 to 125 bp's.
The last time we were that low EURUSD rallied to 1.1276 (18 July 2023).
A similar picture on the USD-Index sees good support around 103.99-104.10 with little support of note thereafter until 102.35.
As long as we do not see a risk-off environment (where USD becomes a safe haven) then this dynamic makes total sense.
For now, as previously noted there is no evidence of that showing up in equity markets, and like 2000, we may well see them continue to hold up unless and until a more negative growth/employment backdrop becomes increasingly obvious . That happened in Sept 2000.
That scenario is for another day and for now "King $" looks a little sickly.
