More reasons emerge which weigh on EUR/USD
Oct 22 (Reuters) -EUR/USD turned lower after nearing its 5-DMA on Tuesday and key 1.0775/1.0800 support is in jeopardy as growth outlooks for the U.S., euro zone and China diverge, while yield spreads continue to favor the dollar.
The IMF lifted its U.S. GDP growth forecasts for 2024 and 2025 while it lowered euro zone and China growth forecasts for the same periods.
ECB policymaker Mario Centeno said Tuesday the risk to inflation is that it undershoots the ECB's 2% target which could hinder growth.
Euro zone yields and rates dropped sharply which helped increase the dollar's yield advantage over the euro.
German-U.S. spreads US2DE2=RR erased earlier tightening and traded at their widest level since July 1.
Terminal rate spreads for the Fed SRAM26 and ECB FEIZ5 widened out to -150bps and hit their widest since May.
These influences helped erase EUR/USD gains and send the pair to a fresh 2-month low.
Technicals also continue to highlight downside risks.
A daily inverted hammer candle is forming after the 5-DMA capped gains. Falling daily and monthly RSIs imply downward momentum is still in place.
The psychological 1.0800 level and August's monthly low sit within the 1.0775/1.0800 zone. A break of this zone may trigger sell stops which may intensify the down trend.
EUR/USD shorts may then target support near 1.0600.
For more click on FXBUZ
(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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