EUR/USD reverses early losses, focus on bond yields
|- EUR/USD recovers to 1.1780 after defending support at 1.1757 in Asia.
- Dovish ECB expectations and risk-off likely to keep bond yields under pressure.
- Euro bulls may have a hard time holding on to gains during the European hours.
While EUR/USD has reversed higher from significant support, more substantial gains will likely remain elusive if the Eurozone bond yields extend Tuesday's decline.
Sellers rejected at 1.1757
The pair is currently trading at 1.1780, having defended the daily chart channel support at 1.1757 during the Asian trading hours.
On Tuesday, the shared currency fell by over 0.30% as expectations of dovish messages from the European Central Bank (ECB) and risk aversion in stock markets boosted Eurozone government bonds, pushing yields lower.
The 10-year German bond yield fell by five basis points to -0.51% on Tuesday, and its Italian counterpart declined by three basis points to 1.03%.
The yields are likely to remain under pressure on Wednesday as Asian stocks are flashing red, and oil is extending Tuesday's 6% decline. In other words, markets are likely to remain risk-averse.
Also, bond markets are likely to continue expectations of supportive messages from the ECB on Thursday. The markets expect the central bank to signal readiness to do more as inflation expectations have declined with the euro's recent strength.
All in all, the single currency may have a tough time holding on to gains seen at press time. A violation of support at 1.1757 would imply bearish reversal, as discussed early Wednesday.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.