DXY Hovers Below $101.140: Will Lower Treasury Yields Lead to Further Declines?

Market Overview

Recent data from the Eurozone showed a sharp decline in German industrial production, falling by -2.4% versus the expected -0.4%. French industrial production also disappointed, down -0.5% against a forecast of -0.3%.

Meanwhile, German trade balance figures slipped to 16.8B from an expected 21.0B, suggesting a slowing economic pace. On the bright side, Italian retail sales beat expectations, growing by 0.5% month-on-month.

In the U.S., the 10-year Treasury yield dropped to 3.70%, breaking key support, which has implications for the U.S. dollar’s strength. The Dollar Index (DXY) has shown some weakness, reflecting lower yields, making the greenback less attractive to investors.

Events Ahead

Later today, key U.S. data could move markets, with the Non-Farm Employment Change forecasted at 164K. Any significant deviation from this figure will likely impact EUR/USD. A lower-than-expected employment change could further weaken the dollar as traders price in softer inflation expectations.

Additionally, speeches from FOMC members, including Williams and Waller, will be closely watched for any clues on future interest rate policies.

EUR/USD currently trades near $1.11126, with the euro potentially gaining strength if U.S. data disappoints or if bond yields remain under pressure. Traders should also keep an eye on Eurozone employment and GDP figures for further direction.

US Dollar Index (DXY)

 

The Dollar Index (DXY) is trading at $100.916, down 0.14%, as it hovers just below the pivot point at $101.140. Immediate resistance stands at $101.453, with higher targets at $101.836 and $102.120. A break above $101.140 could strengthen bullish momentum. However, failure to reclaim this level could lead to further declines, with immediate support at $100.781 and lower levels at $100.541 and $100.316.

The 50-day Exponential Moving Average (EMA) at $101.372 is acting as resistance, while the 200-day EMA at $102.340 signals a broader downtrend. If the DXY breaks below $101.140, expect intensified selling pressure as the bearish trend deepens further.

US 10-year Bond Yields

The U.S. 10-Year Treasury yield has dipped to 3.70%, breaking below key support at 3.739%. This decline signals growing demand for safe-haven assets, as investors anticipate economic uncertainty and potentially softer inflation data.

The 50-day EMA at 3.814% suggests further downside risk, with the next support around 3.667%. Lower bond yields typically weaken the U.S. dollar, as they reduce the currency’s attractiveness for foreign investors seeking higher returns.

Consequently, this drop in yields could weigh on the dollar, making it less competitive in the global market, while supporting risk-sensitive assets like equities and commodities.

EUR/USD Technical Forecast

EUR/USD is trading at $1.11126, up 0.02% in the 4-hour timeframe. The pivot point at $1.11056 is crucial for determining the next move. If the pair holds above this level, the outlook remains bullish, with immediate resistance at $1.11394, followed by $1.11656 and $1.11909. On the downside, support sits at $1.10771, with further levels at $1.10571 and $1.10330.

The 50-day Exponential Moving Average (EMA) at $1.10859 provides short-term support, while the 200-day EMA at $1.10106 suggests longer-term bullish momentum. A break below the pivot could trigger selling pressure, potentially leading to a deeper pullback toward the $1.10771 support zone.