EUR/USD on solid ground as US Y-yield curve hits fresh 10.5-year low

US Treasury yield curve flattens/drops to lowest since October 2007, could hurt the USD.
Focus on the German Zew survey and US-German 10-year yield spread.

Omkar Godbole FXStreet Contributor

The EUR/USD pair rose to 1.2395 on Monday as the spread between the US 10-year treasury yield and the 2-year treasury yield narrowed to 45.5 basis points - the lowest level since October 2007.

For more than a year, the relentless flattening of the yield curve has hurt the greenback. Also, he Dec20-Mar21 Eurodollar spread has turned negative, meaning the market expects the US rate hike cycle to end in 2021. This is bad news for the USD bulls.

However, that does not necessarily mean the EUR/USD will rally. Moreover, the 10-year US-German yield spread continues to rise in the USD-positive manner. As of writing, the spread stands at 230.6 basis points - the highest since December 2016.

So, the EUR/USD may have tough time revisiting 1.25, unless the yield spread drops in the USD-negative manner. That said, a move above 1.24 cannot be ruled out if the German Zew survey, due at 09:00 GMT, beats estimates.

EUR/USD Technical Levels

Acceptance above 1.24 (psychological hurdle) would open up upside towards 1.2476 (March 27 high) and 1.2538 (Jan. 25 high). On the downside, breach of support at 1.2356 (5-day MA) could yield a drop to 1.2327 (50-day MA) and 1.23 (psychological support).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bullish	Neutral	Expanding
1H	Bearish	Neutral	Low
4H	Bullish	Overbought	Shrinking
1D	Bullish	Neutral	Low
1W	Bullish	Neutral	Low
Updated Apr 17, 03:30 GMT

Author

Omkar Godbole

FXStreet Contributor

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

GBP/USD advances to three-month peak beyond 1.3600

GBP/USD extends its daily rally and trades at its highest level since mid-May above 1.3600. The US Treasury Department decision to double the sice of liquidity support buyback operations for longer-dated nominal coupon securitiez weighs heavily on the US Dollar and helps the pair push higher. Earlier in the day, the data from the UK showed that annual Consumer Price Index (CPI) inflation picked up to 2.9% in July, meeting estimates, while core CPI rose by 2.6% YoY in July versus 2.5% expected.

EUR/USD surges to 11-week high above 1.1650 after US Treasury announcement

EUR/USD gathers bullish momentum and trades at its highest level since early June above 1.1650 on Wednesday. The US Dollar stays under heavy bearish pressure after the US Treasury announced that it will increase the size of liquidity support buyback operations for longer-dated nominal coupon securities. Later in the day, investors will scrutinize FOMC Minutes for fresh clues on policy outlook.

Gold climbs 2% as US Treasury buyback plan pressures long-term yields

Gold (XAU/USD) enters Wednesday’s American trading hours with decent intraday gains, as a softer US Dollar (USD) and a sharp pullback in long-term US Treasury yields help the metal recover all the previous day’s losses.

Crypto Today: Bitcoin, Ethereum, XRP defend key support as ETF inflows return

Bitcoin’s upside remains capped on Wednesday while the downside appears strongly supported above $64,000. The Crypto King’s early week rebound lost momentum near $65,000 as investors assessed the impact of geopolitical tensions in the Middle East.

WTI Oil climbs as US-Iran standoff keeps Middle East supply risks elevated

West Texas Intermediate (WTI) Oil holds firm on Wednesday, hovering near its highest level in more than three weeks as traders balance Middle East supply risks against rising US crude inventories. At the time of writing, the US benchmark trades around $85.20 per barrel, up nearly 1% on the day.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.