EUR/USD Breaks Below 1.1450 as US Yield Advantage Widens

Traders' Opinions

Summary:

EUR/USD falls below 1.1450 to seven-week lows as German political uncertainty and French fiscal concerns weigh on the Euro. Rising Treasury yields and expectations for further Fed tightening continue to strengthen the Dollar.

SELL EURUSD

EXP

TRADING

1.14600

Entry Price

1.13600

1.16000

1.14517 -0.00113 -0.10%

0.0

Pips

Flat

1.13600

Exit Price

1.14600

Entry Price

1.16000

The Euro remains under sustained selling pressure on Tuesday, with EUR/USD falling below 1.1450 to fresh seven-week lows. A modest improvement in global risk appetite following the recent retreat in oil prices has done little to support the common currency, as political concerns in Germany and France combine with rising US Treasury yields to favor the Dollar.

Germany has emerged as a fresh source of uncertainty following a severe setback for Chancellor Friedrich Merz's CDU in the Mecklenburg-Vorpommern state election. The party failed to secure the 5% threshold required to enter the regional parliament, raising questions over Merz's political support even as he pledged to remain in office and continue pursuing his government's planned economic reforms.

The result could have broader implications for European policy. Growing political pressure on Merz has increased uncertainty surrounding the Eurozone's proposed €2 trillion budget package, which includes a substantial expansion in defense spending. Concerns that Germany's domestic political environment could complicate negotiations have therefore added another headwind for the Euro.

France is also contributing to the currency's weakness. A downgrade of French government debt by a smaller ratings agency has renewed attention on the country's deteriorating fiscal position, with debt at its highest level since 1978. Investors are increasingly sensitive to the possibility of further ratings action, particularly as meaningful fiscal tightening remains difficult to achieve.

Monetary policy is providing only limited protection. The ECB has already raised rates twice this year and has signaled that additional tightening remains possible if inflation stays elevated. President Christine Lagarde's remarks later on Tuesday will therefore be watched for confirmation that the central bank remains prepared to act.

The larger pressure on EUR/USD, however, continues to come from the United States. US Treasury yields have risen sharply, strengthening the Dollar as markets price a longer Federal Reserve tightening cycle. MUFG notes that the two-year Treasury yield has climbed roughly 55 basis points since late last month, while markets are now factoring in the possibility of three additional Fed hikes over the coming year.

With US yields moving higher while European political and fiscal concerns intensify, the fundamental balance continues to favor the Dollar. Unless the Euro finds support from a more hawkish ECB message or US yields begin to retreat, EUR/USD could remain vulnerable below 1.1450.

Technical Analysis

EUR/USD continues to trade under clear bearish pressure on the 4-hour chart, with recent price action showing little evidence that the decline has run its course. The pair has progressively shifted lower after losing the 1.1560–1.1570 region, an area that previously provided support but now represents a significant barrier to any meaningful recovery.

Price is currently hovering near 1.1460, where sellers are testing the 1.1450–1.1460 support zone. Although this area has temporarily slowed the decline, repeated tests without a convincing bullish rebound leave the level increasingly vulnerable. The recent sideways movement therefore looks more like consolidation within the broader decline rather than the beginning of a sustained reversal.

A short-lived recovery toward 1.1480–1.1500 remains possible before bearish momentum resumes. As long as EUR/USD remains beneath this area, the setup continues to favor another push through 1.1450. A decisive breakdown would bring the 1.1350–1.1370 demand zone into focus as the next major downside objective.

The chart projection also allows for a reaction from this lower support area before another wave of selling develops. Should 1.1350 eventually give way, the bearish extension could carry EUR/USD toward the 1.1310–1.1320 region.

For the bearish structure to materially improve, buyers would need to reclaim 1.1560–1.1570 and establish price back above the former support zone. Until then, corrective rallies remain vulnerable to selling, leaving the path of least resistance pointed lower.

TRADE RECOMMENDATION

SELL EUR/USD

ENTRY PRICE: 1.1460

STOP LOSS: 1.1600

TAKE PROFIT: 1.1360

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EUR/USD Breaks Below 1.1450 as US Yield Advantage Widens

Technical Analysis

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