EUR/USD: Falling Italy-German yield spread is EUR-positive, focus on US ADP data

The EUR/USD could remain bid on narrowing Italy-Germany yield spread.
The escalating trade tensions may boost haven demand for the US dollar.
Better-than-expected US ADP and non-manufacturing PMI could put a bid under the greenback.

Omkar Godbole FXStreet Contributor

The EUR/USD produced a big green candle on Wednesday, possibly due to a sharp drop in the Italy-Germany bond yield spread.

At press time, the common currency is trading at 1.1635, having clocked a high of 1.1659 in early Asia.

The spread between the 10-year Italian government bond yield and the German 10-year bond yield dropped sharply in the last two days from 296 basis points (bps) to 268 bps, on EU friendly budget remarks.

Moreover, the feeling spread indicates that the market pessimism over the Italian budget is receding. As a result, the common currency could remain bid today.

However, if the European equities drop in response to escalating US-China trade tensions, then the EUR/USD may come under pressure. Further, the USD may pick up a bid if the US ISM non-manufacturing number and the ADP employment report paints a rosy picture of the US economy.

EUR/USD Technical Levels

Resistance: 1.1656 (61.8% Fib R of the pullback), 1.17 (psychological hurdle), 1.1733 (Aug. 28 high)

Support: 1.1629 (session low), 1.1585 (Aug. 31 low support on the hourly chart), 1.1530 (Sep. 4 low)

Italy-German yield spread

Author

Omkar Godbole

FXStreet Contributor

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

EUR/USD: Cautiously optimistic near 1.1550 ahead of the ECB

EUR/USD extends its weekly recovery for the third day in a row on Wednesday, navigating in a sidelined fashion around 1.1550 on the back of humble losses in the US Dollar. In the meantime, market participants continue to closely follow developments in the Middle East while slowly gearing up for the ECB gathering on Thursday.

GBP/USD recedes from tops, hovers around 1.3400

GBP/USD could not sustain the initial bull run and is now slipping back toward the 1.3400 neighbourhood on Wednesday. Cable’s continuation of the ongoing leg higher follows mild selling pressure on the Greenback, despite steady uncertainty on the geopolitical front and elevated US inflation.

Gold bleeding continues as Middle East crisis escalates, Fed hike coming

Gold is accelerating its downward trends and approaches the area of $4,100 per troy ounce on Wednesday, where the 2026 bottom sits so far. The persistent decline in the precious metal almost exclusively follows the swelling opinion that the Fed will keep a cautious stance in H2, a view that was reinforced following earlier US CPI data.

$1,500: Why Ethereum just crashed 20% despite spot markets barely selling

Ethereum (ETH) recently suffered one of its sharpest declines of 2026, dropping more than 20% and briefly testing the $1,500 area. While the sell-off appeared to reflect broader market fears, derivatives and on-chain data suggest a more complex story may be unfolding beneath the surface.

Brutal sell-off: Silver deepens months-long slide, refocusing on $60

Silver has never been known for its calm temperament. The precious metal can spend weeks grinding higher before suddenly giving back months of gains in a matter of days. That volatile reputation has been on full display in recent weeks.

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.