Can EUR/USD drop to 1.0000?
EUR/USD has fallen over 700 pips since July trade below 1.0500. Hypothetically, if similar movement continues, the euro could be below 1.0000 by the start of 2024. Analyzing a 20-year chart of EUR/USD makes this movement appear less likely. In that time, the pair has spent less than three months below parity. Looking at futures options, there is roughly a 9% chance of a drop below 1.0000 by January.*
A potential factor for the direction of EUR/USD is the divergence of 10-year yields. US 10-year treasury yields have soared to 16-year highs above 4.5% while German 10-year yields have stayed below 3%. If these two prices continue to diverge in the current direction, USD could have more reason to gain on EUR. Conversely, if the gap closes or German yields surpass the US, the euro may rise back against the dollar.
