- EUR/USD looks south as coronavirus growth weakens risk appetite.
- The US-German bond yield spreads are rising in a USD-positive manner.
- A big miss on US Retail Sales is needed to put a floor under EUR/USD.
EUR/USD has declined by 1% so far this week and looks set to extend losses unless the US data disappoints expectations. In that case, the dollar may face selling pressure, putting a floor under the currency pair.
Coronavirus concerns weigh
Fears that the Eurozone economy would be hit hard by the coronavirus resurgence is pushing the US-German yield differentials higher and weighing over the common currency.
The 10-year spread has risen to 134.4 basis points, the highest level since March. The two-year yield differential, which is more sensitive to short-term interest rate and inflation expectations, is also widening in a USD-positive manner.
As such, the path of least resistance for the EUR/USD pair appears to be on the downside.
Focus on US data
As represented by Retail Sales, consumer spending in the world's largest economy is expected to have risen by 0.7% month-on-month in September following August's 0.6% rise.
A weaker-than-expected data will likely revive concerns regarding the US economy's health and trigger a broad-based decline in the dollar – more so, as Washington continues to remain deadlocked over a new round of fiscal stimulus.
The focus will also be on the US Industrial Production and Michigan Consumer Sentiment data due for release later today. Meanwhile, the Eurozone Trade Balance and Consumer Price Index, due at 09:00, may not have a big impact on the EUR pairs. At press time, the pair is trading largely unchanged on the day near 1.17.
Technical levels
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