EUR/USD: On defensive below 61.8% Fib ahead of Draghi speech, US-DE yield differential could be bottoming out

EUR/USD has found acceptance below the key 61.8 percent Fibonacci retracement.
The spread between the 10-year US and German government bond yields could rise in the EUR-negative manner over the next few days, according to technical charts.
ECB's Draghi is likely to reiterate the dovish message delivered three weeks ago.

Omkar Godbole FXStreet Contributor

EUR/USD is on the defensive, having closed below 1.1280 (61.8% Fib R of 1.1176/1.1448) yesterday and the spread between the US and German 10-year bond yields is flashing early signs of bullish reversal ahead of the European Central Bank (ECB) President Draghi's speech.

The shared currency fell 0.40 percent on Tuesday, as the US 10-year treasury yield ticked higher to 2.45 percent, having hit a low of 2.37 percent on Monday. Meanwhile, its German counterpart gained just one basis point. Therefore, the spread between the two jumped higher, forming an inverted inside-day bullish hammer - an early sign of trend change. Put simply, the candlestick pattern indicates that the spread could rise in the EUR-negative manner over the next few days.

The recovery in the US-DE yield differential, however, may not happen if the ECB President Draghi, during his speech at 08:00 GMT, sounds less dovish than he did three weeks ago at the ECB presser. The central bank head had struck a cautious tone on eurozone economy while pushing out rate hike plans to 2020 and could reiterate that message today, as there hasn't been a marked improvement in the economy in the last few weeks.

So, the path of least resistance for the EUR appears to be on the downside. Supporting the bearish case are the downward sloping 5- and 10-day moving averages (MAs), acceptance below the 61.8% Fib level of 1.1280 and the RSI's drop below 50.00.

Technical Levels

1. R3 1.1372
2. R2 1.135
3. R1 1.1308
PP 1.1286
1. S1 1.1244
2. S2 1.1222
3. S3 1.118

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 sits near a one-month top, above 0.7000 amid fresh USD selling

AUD/USD holds above 0.7000 through the Asian session, trading near a one-month high touched earlier this Monday amid renewed US Dollar selling. US bond yields decline further amid a modest pullback in crude oil prices, capping the USD recovery from a three-week low. Moreover, bets for a November RBA rate hike support the Aussie, though upside seems capped ahead of the crucial two-day FOMC meeting, starting Tuesday.

USD/JPY struggles below 157.00 on weak USD; holds above one-month low ahead of Fed, BoJ meetings

USD/JPY attracts fresh sellers during the Asian session on Monday, stalling its recovery from the lowest level since September 18, touched Friday as a further decline in US bond yields weighs on the US Dollar. Meanwhile, the Japanese Yen benefits from a more hawkish BoJ, further weighing on the currency pair. The downside, however, seems limited as traders keenly await Fed and BoJ policy meetings later this week.

Gold sticks to modest recovery gains above $4,000 as Fed hike bets cap upside

Gold stages a modest recovery from the vicinity of a three-month low, trading above the $4,000 psychological mark through Monday’s Asian session amid a softer US Dollar. US President Donald Trump has ruled out immediate military action against Iran, triggering a modest pullback in crude oil prices. Furthermore, Federal Reserve officials have signaled no urgency to raise interest rates immediately.

Cardano's derivatives and on-chain data confirm bears in control

Cardano extends losses, trading below $0.202 after three consecutive weeks of more than 20% declines since early October. Selling pressure continues to build as weakening derivatives metrics, bearish on-chain signals and a deteriorating technical outlook point to further downside risks. Derivatives data shows a bearish bias for Cardano.

CFTC Report: WTI rally runs ahead of positioning

The week in one sentence: WTI prices surged while speculative longs were cut in the week to October 20, creating the clearest price/positioning divergence. Sterling and the Canadian Dollar led the constructive currency shift, while Yen longs also rebuilt. Speculators turned less constructive on the WTI, reducing their net exposure to around 89.3K contracts.

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.