- For the EUR, the path of least resistance is on the downside as various yield spreads continue to widen in the EUR-negative manner.
- The Italy-German 10-year yield differential widened to fresh highs since 2013 and looks set to rise even further on the EUR-Rome standoff.
- The US-German yield differential is rising to new multi-decade highs each passing day.
The EUR/USD dropped to 1.1449 yesterday - the lowest level since Oct. 9 - and looks set to drop further to 1.14 as various yield spreads are rising in the EUR-negative manner.
For instance, the spread between the 10-year Italian government bond yield and its German counterpart rose to 3.25 percent yesterday, the highest level since 2013 and could rise further to fresh five year highs today as the European Union (EU) is not happy with Italy's planned budget deficit. The EU has reportedly called the budget plan as an 'unprecedented' deviation of the bloc's budget rules.
Further, the two-year US-German yield differential rose to a fresh multi-decade high of 353 basis points yesterday and looks set to rise further as the Fed minutes released earlier this week revealed a growing consensus among the officials on the need for above-neutral rates.
And last but not the least, the technicals are biased bearish: 5-,10-, and 21-day EMAs are trending south, the 14-day RSI is bearish below 50.00 and the MACD has produced a bearish crossover. All-in-all, the support t 1.1432 could be breached soon.
Technical Levels
Resistance: 1.1463 (Oct. 4 low), 1.1493 (5-day EMA), 1.1519 (10-day EMA)
Support: 1.1432 (Oct. 9 low), 1.1422 (76.4% Fib R of 1.131/1.1815), 1.14 (psychological support)
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
GBP/USD slides to its lowest level since November, eyes 1.2400 ahead of UK jobs data
GBP/USD drifts lower for the third straight day on Tuesday and drops to its lowest level since November 17 during the Asian session. Spot prices trade around the 1.2420 region as traders now look to the UK monthly employment details for a fresh impetus.
EUR/USD steadies above 1.0600, awaits German ZEW and Powell speech
EUR/USD is holding above 1.0600 in the European morning on Tuesday, having hit fresh five-month lows. The pair draws support from sluggish US Treasury bond yields but the rebound appears capped amid a stronger US Dollar and risk-aversion. Germany's ZEW survey and Powell awaited.
Gold price holds steady below $2,400 mark, bullish potential seems intact
Gold price oscillates in a narrow band on Tuesday and remains close to the all-time peak. The worsening Middle East crisis weighs on investors’ sentiment and benefits the metal. Reduced Fed rate cut bets lift the USD to a fresh YTD top and cap gains for the XAU/USD.
SOL primed for a breakout as it completes a rounding bottom pattern
Solana price has conformed to the broader market crash, following in the steps of Bitcoin price that remains in the red below the $65,000 threshold. For SOL, however, the sensational altcoin could have a big move in store.
Key economic and earnings releases to watch
The market’s focus may be on geopolitical issues at the start of this week, but there is a large amount of economic data and more earnings releases to digest in the coming days.