EUR/USD depressed around 4-day lows in the 1.1150/45 band

The offered bias surrounding the single currency remains well and sound on Wednesday and is motivating EUR/USD to trade on the defensive in the mid-1.1100s.

EUR/USD looks to yields, data

Spot is navigating on the back foot since Monday and it has almost fully faded last week’s spike to fresh tops beyond 1.1200 the figure.

Shrinking yields in the German money markets are following the generalized decline in the global markets, with yields of the German 10-year reference falling to -0.18%, area last visited in July 2016.

In addition, the German labour market figures showed the jobless rate ticked higher to 5.0% in May and the Unemployment Change increased more than expected by 60K during the same period. These poor prints add to the June’s drop in the Business Climate tracked by GfK seen earlier in the week.

What to look for around EUR

Recent data releases in Euroland and Germany have poured cold water over the idea that some healing process could be under way in the region, re-shifting the focus to the ongoing slowdown and its probable duration and extension. This view has been reinforced in recent ECB minutes, where the Council appeared unconvinced about a pick up in the economic activity in H2 2019. That said, the current ‘neutral/dovish’ stance from the ECB is expected to persist for the remainder of the year and probable through H1 2020. The broad-based risk-appetite trends and USD-dynamics should dictate the sentiment surrounding the European currency for the time being, all in combination with the now stalled US-China negotiations and potential US tariffs on EU products. On the political front, Italian politics has resurfaced as a source of uncertainty and volatility, all gyrating around the country’s discomfort with EU fiscal rules.

EUR/USD levels to watch

At the moment, the pair is retreating 0.05% at 1.1154 and faces immediate contention at 1.1142 (low May 21) seconded by 1.1107 (2019 low May 23) and finally 1.0905 (high Mar.27 2017). On the upside, a breakout of 1.1215 (high May 27) would target 1.1230 (55-day SMA) en route to 1.1264 (monthly high May 1).