Euro falls for third day in a break below 0.9900

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The euro touched a six-week high on Thursday but it’s now fallen in three straight days.

That’s generally followed the broad trend in the US dollar. It sank last week on falling Treasury yields and bets that the Fed wouldn’t hike as much. It’s rebounded today after a Timiraos article saying the Fed could hike more and hold rates higher for longer.

Last week’s ECB sent mixed message but the general impression was that Lagarde wasn’t eager to hike. That could change though after today’s eurozone inflation data ran at 10.7% compared to 10.2% expected.

The main event is this week’s Fed decision. A 75 bps hike is 98.9% priced in but the market is split on whether December will be 50 bps or 75. Messages along those lines will dictate the next steps for the dollar and EUR/USD.

The main feature on the chart continues to be the break of the year-long downtrend line but we’re now going back and retesting it. If it breaks, it could signal the start of a longer-term period of consolidation around the lows.