The rebound momentum of the euro against the US dollar is weakening, as the widening interest rate differential combined with the impact of oil prices brings renewed downside risks, and technical support is on the verge of collapse.

The rebound momentum of the euro against the US dollar is weakening, as the widening interest rate differential combined with the impact of oil prices brings renewed downside risks, and technical support is on the verge of collapse.

智通财经2026/07/21 15:21

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The rebound of the euro against the US dollar since the low on June 24 is facing a test, as the widening of the US-German government bond yield spread has weakened the euro's upward momentum. At the same time, the continued rise in oil prices has sparked expectations that the Federal Reserve will maintain a hawkish stance to cope with inflationary pressures, and these dual factors are jointly weighing on the exchange rate trend.
Since the beginning of July, the yield advantage of US Treasuries over German bunds had narrowed and supported the euro's rebound, but this trend reversed last week. The spread has again widened to below -140 basis points and is approaching -145 basis points. The expanding yield advantage of the US dollar is currently the main drag on the euro against the dollar.
Technical indicators are also flashing warning signals. The euro against the US dollar only briefly broke above the descending trendline from the May 11 high before falling back below this line as well as the 10-day and 21-day moving averages. It is currently threatening to break below the ascending trendline support established since the June 24 low.
If this ascending trendline is effectively breached, it means that the current rebound is merely a correction within the larger downtrend, and medium-term downside risks will once again take center stage.

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The rebound momentum of the euro against the US dollar is weakening, as the widening interest rate differential combined with the impact of oil prices brings renewed downside risks, and technical support is on the verge of collapse.

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