EUR/USD drops 0.30 percent as the yield differential widens

EUR/USD drops on US tax reform news
US-German 10-year yield spread widens, currently at levels last seen in May

Omkar Godbole FXStreet Contributor

EUR/USD fell more than 0.30 percent in Asia to low of 1.1807 as the US Senate approved budget in crucial step forward for Republican tax cuts.

The tax reform news pushed up the Treasury yields, resulting in widening of the US-German 10-year yield spread.

The spread currently stands at 196 basis points; the highest since mid-May.

Ahead in the day, the USD may remain well bid on the back of the tax reform news. The Eurozone producer price index data and current account data are unlikely to move EUR pairs in a big way.

Kathy Lien from BK Asset Management writes, " Fed Chair Yellen will speak today, but not until markets close so most of the day will be spent guessing whether she will be more hawkish or dovish. Chances are there will be limited new position taking ahead of her lecture on monetary policy since the financial crisis."

EUR/USD Technical Levels

The spot was last seen trading around 1.1815 levels. James Chen from Forex.com shares his view on EUR/USD-

"EUR/USD is trading just under its 50-day moving average and between key price levels around the 1.1700 support area to the downside and the 1.1900 resistance area to the upside. The ECB decision next week will help dictate if and in what direction the euro may break this trading range. A likely scenario is that the central bank may advocate a more gradual tapering process over a longer period of time than expected, in part to avoid further euro strengthening. If this is the case, the euro could take a hit and EUR/USD could stumble, especially if Fed-driven dollar support resumes. In this event, a EUR/USD breakdown below 1.1700-area support could pressure the currency pair towards key downside targets around the 1.1600 and 1.1450 support areas."

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.