- EUR/USD remains trapped in 1.1250-1.1167 range for the fifth day.
- The downside has been capped near 1.1167 despite the German yield curve inversion.
- EUR could take a beating if the German ZEW survey underlines the need for additional monetary easing by the ECB.
EUR/USD is lacking a clear directional bias for the fifth straight day.
The pair charted a Doji candle – a sign of indecision – last Tuesday and has remained trapped largely in a narrow range of 1.1250-1.1167 ever since.
German yield curve inverts
The spread between the German 10-year and three-month Bund yields fell below zero on Aug. 6 and stood at -0.036 basis points on Monday.
Even so, the downside in EUR/USD has been restricted around 1.1167. The EUR's resilience could be associated with the escalating US-China trade tensions, protests in Hong Kong and US-Iran tensions.
After all, the European Central Bank is running a negative interest rate policy and the entire German yield curve is offering negative returns for the first time on record. So, many observers believe the EUR is a funding currency - the one which rises during risk-off and is used to fund purchases of risk assets during improve risk appetite.
So, the EUR could continue to defend 1.1167 if the risk-off worsens. The common currency, however, may pierce the lower edge of the recent trading range if the German data disappoints expectations.
Focus on German data
The ZEW survey scheduled for release at 09:00 GMT is expected to show the Economic Sentiment deteriorated to -30 index points in August from July's reading of -24. Meanwhile, Current Situation is forecasted to drop to -7 from -1.1.
If the ZEW survey matches estimates or print below estimates, then markets may price in greater odds of an aggressive ECB easing in the near term by offering the EUR across the board.
Apart from ZEW data, the EUR pair may also take cues from the German inflation number scheduled for release at 06:00 GMT. In the American session, the focus would shift to the US Consumer Price Index.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD could extend the recovery to 0.6500 and above
The enhanced risk appetite and the weakening of the Greenback enabled AUD/USD to build on the promising start to the week and trade closer to the key barrier at 0.6500 the figure ahead of key inflation figures in Australia.
EUR/USD now refocuses on the 200-day SMA
EUR/USD extended its positive momentum and rose above the 1.0700 yardstick, driven by the intense PMI-led retracement in the US Dollar as well as a prevailing risk-friendly environment in the FX universe.
Gold struggles around $2,325 despite broad US Dollar’s weakness
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Bitcoin price makes run for previous cycle highs as Morgan Stanley pushes BTC ETF exposure
Bitcoin (BTC) price strength continues to grow, three days after the fourth halving. Optimism continues to abound in the market as Bitcoiners envision a reclamation of previous cycle highs.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Federal Reserve might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.