Euro Drops Below 1.1200 as US Dollar Strength Persists

The Euro fell back below 1.1200 against the US Dollar on Monday, continuing a trend driven by persistent US Dollar strength. The EUR/USD pair dropped 0.60%, trading around 1.1190 at the time of writing. Despite a weaker ISM Services PMI, the US Dollar maintained its positive momentum, supported by elevated US Treasury yields. Meanwhile, political turmoil and concerns over Europe’s public finances added pressure on the Euro.

The latest business activity data confirmed the resilience of the US economy. The final S&P Global Services Purchasing Managers Index (PMI) was revised higher to 58.8 in September, while the ISM Services PMI eased to 54.9, slightly below market expectations. However, both indicators remained above the 50 threshold, indicating expansion. The data followed last week’s weaker-than-expected US employment report, which reduced the likelihood of a Federal Reserve rate hike in October to around 20%.

US Treasury yields remain close to multi-year highs, with the benchmark 10-year yield holding around 5.30%. This rise reflects persistent inflation risks and growing concerns over the US debt burden. On the European side, the Euro faces mounting political and fiscal uncertainty, particularly in France and Spain. Despite some encouraging Eurozone economic data, the divergence between the US and European economies keeps the EUR/USD under pressure.

Technical analysis suggests a bearish near-term tone for EUR/USD, with the pair trading below key moving averages. Initial resistance levels are at 1.1215 and 1.1270, while support is at 1.1161. A sustained break below this support could lead to further bearish extension in the short term.