In turn, this is pushing EUR/USD slightly lower on the day as the tight range earlier expands a little. The pair is now down to a low of 1.0916 and is testing key technical support from its 100-day moving average (red line) at 1.0915. Keep in mind that there are also large option expiries in play for the pair at the 1.0900-20 region today.
As such, that could keep price action just above the 1.0900 mark before the expiries roll off but it would highly depend on broader market sentiment as well.
If the selling in bonds and equities pick up, that is likely to exacerbate dollar gains on the day - especially if we see a stronger sense of risk aversion i.e. the earlier selling turning into a real rout in markets.
Looking at the technicals, a drop below the 100-day moving average will put sellers in a more prominent position in searching for further downside towards 1.0800 next.
The euro's struggles are not helped by the fact that economic conditions are worsening alongside a looming credit crunch. And when you add in the ECB also potentially erring towards a pause in September, the supposed divergence to the Fed is no longer existing too. This was something I mentioned last week here.