EUR/USD inter-markets: fade the rallies?

EUR/USD has deflated more than 50 pips since yesterday’s failed attempt to reclaim the 1.1200 handle, as the demand for the greenback seems to have woken up somehow.

Absent releases or significant events in Euroland today, the bulk of the pair’s price action remains at the mercy of the USD dynamics, prolonging the case seen in past sessions.

The extent of the current leg lower in EUR/USD seems to exclusively rely on the ability of the greenback to recover further ground after the recent sell off. Yields in US money markets keep pointing higher in the European afternoon so far, sustaining the USD momentum.

Same case with Fed Fund futures prices, although the probability of a rate hike by the Federal Reserve has eased to 9% at the September meeting and it is just above 36% for the month of December, all tracked by CME Group’s FedWatch tool.

Volatility measured by VIX is navigating session tops, although it still remains in depressed levels.

Looking ahead and in the near term, the critical 200-day sma at 1.1083 emerges as the next relevant support in case the bearish note picks up extra pace, ahead of August low at 1.1043.