EUR/USD: Focus on treasury yields and today’s close

EUR/USD looks set to put on a good show on the last trading day of the week, having charted a bullish engulfing candle on Thursday despite weaker-than-expected German and Eurozone data releases. 

The shared currency took a beating in European session yesterday with the pair falling to a new 2019 low of 1.1107 following the release of below-forecast German and Eurozone preliminary manufacturing and sector PMI numbers. Notably, the German IFO report also declined with the business climate index falling to its lowest level since 2014. 

The losses, however, were reversed in the North American session, courtesy of broad-based USD weakness. The pair ended up creating a bullish engulfing candle – an early warning of potential bearish-to-bullish trend change. 

The trend change, however, would be confirmed if the pair closes today above 1.1188 (Bullish engulfing candle’s high). That looks likely as markets are likely to remain risk averse today, keeping both the treasury yields under pressure. 

This is because trade tensions are unlikely to subside any time soon. China’s President Xi on Thursday warned about a "new long March and “self reliance” – a sign the world’s second largest economy is unlikely top back down easily and is ready for a long drawn out trade war. 

China’s tough stance could embolden Trump to push for new tariffs on $300 billion of Chinese goods, leading to further deepening of trade tensions. 

As of writing, the spot is trading largely unchanged on the day at 1.1180. the 10-year treasury yield is seen at 2.32%, having hit a 19-month low of 2.29% yesterday. The bullish close in EUR/USD may remain elusive if the US durable goods orders, scheduled for release today, blows past expectations, lifting the treasury yields higher.

Pivot levels