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EUR/USD Outlook: Investors Remain Cautious Amid Steady DXY Index

EUR/USD has slid about 0.8% since my last coverage, largely due to the increasing strength of the US dollar. Earlier this month, the dollar strength index rose by 1% as Fed Chair Jerome Powell suggested that interest rates would remain elevated if inflation does not cool down.

According to Barclays, the US economy is as robust as ever suggesting that the battle with inflation might not be over. Furthermore, the treasury yields are up 4% from their monthly lows, contributing to the weakness in the EUR to USD. The currency pair is trading at $1.0666 after sliding 0.16% on Monday.

As shown in the chart below, the EURUSD pair had a pullback last week and is now displaying strength again. Most investors are still betting on the retest of the 200 MA and the bottom of the ascending channel as shown in the chart.

However, if the dollar continues to flex its muscles, I anticipate the pair to see a 1.7% correction toward the key support level of $1.0486, which is the January 2023 low. However, confirmation of this move will largely depend on the US CPI figures for October that are due to be released on Tuesday.

EUR To USD Chart