EUR: EUR/USD - Tops Out Above 1.1600 As Trump Off-Ramp Pushed Out

The EUR/USD range overnight was 1.1672-1.1747, Asia is currently trading around 1.1695. The pair remained heavy as the USD built on its gains and oil added to the pair's headwinds. The price does not look great for the bulls now and a sustained close below 1.1700 could signal the potential for a deeper pullback toward the 1.1400-1.1500 area. On the day, having clearly broken out of its recent range I would be looking for rallies to now be faded initially. The first sell-zone is back toward 1.1725-1.1745 and then the 1.1800 area, looking for the move lower to now build for a potential test back toward 1.1500.

• Holger Zschaepitz - “The Euro has dropped by >1% against the Dollar, most since Jul 2025, reflecting the view that Europe stands to lose more from Iran escalation. European gas prices have surged by as much as 50%, while US gas prices have risen by only ~8% at their peak.”
• The Long View on X: “Germany finally got the memo and woke up to the fact China was gutting their economy… “We are a country of industrial companies — large, medium-sized, and small — and I want us to remain a country with strong industry. I am not prepared to give up Germany as an industrial location just because we are pursuing an over-rotated environmental policy. In the end, we may be climate-neutral — that may be so — but then we would no longer have a single industrial job left. That is not my answer.” -Merz”
• Options : Closest significant option expiries for NY cut, based on DTCC data: 1.1575(EU1.83b). Upcoming Close Strikes : 1.1600(EU1.54b Mar 5), 1.2000(EU1.36b March 4) - BBG
• The EUR/USD Average True Range for the last 10 Trading days: 59 Points

Fig 1 : EUR/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

US treasury futures are steady Tuesday with limited follow on from the overnight sell off on inflationary fears.  The 10-Yr is up +01 at 113-03+ above all major moving averages, and back below overbought on the 14-day relative strength index. 

Cash has continued to weaken, though the pace has slowed dramatically.  

• The 2-Yr is flat at 3.477%
• The 5-Yr is flat at 3.612%
• The 10-Yr is up +0.4bps at 4.042%
• The 30-Yr is up +1.2bps at 4.694%

Typically longer bonds are most sensitive to inflation fears.  The 30-Yr is currently near to the bottom end of the 3-month range of 4.61% - 4.92%, suggesting upside risks for yields could build.  

Tuesday Calendar:  

• 03/03 -- Wards Total Vehicle Sales
• 03/03 0955 NY Fed Williams moderates discussion
• 03/03 1130 US TSY -  $90B 6W bill auction
• 03/03 1155 MN Fed Kashkari Bbg investment confernce

Source: Bloomberg Finance L.P. / MNI

The USD index is holding a little lower for the session, last near 1195. Higher beta plays are outperforming, led by AUD. The move down in the USD/CNY fixing and the strong CNY onshore open is also spilling over to AUD. AUD/USD was last near 0.7115, with recent highs at 0.7137 an upside focus point. USD/CNH is back under 6.8800, likewise for onshore USD/CNY spot. Highs in USD?CNH yesterday were at 6.9133 

• Oil prices holding higher, but still under Monday highs. Brent crude last just under $79/bbl. Equity sentiment less positive, but US cash markets outperformed in Monday trade. Eminis were last off around 0.40%.
• Some offset for the AUD also coming from higher precious metals (gold +1% to be near $5400), while remarks earlier from RBA Governor Bullock (every RBA meeting live etc) also likely helping the A$ at the margins.