EUR/USD: Stuck at 4H 200MA ahead of German data, focus on US yield curve

  • The 4-hour 200-candle moving average resistance continues to cap upside in EUR/USD. 
  • An above-forecast German GFK consumer confidence could yield a break above the MA resistance, currently at 1.1321. 
  • Focus now is on the spread between the US 10-year and two-year Treasury yields. 

EUR/USD's bounce from the lows near 1.1270 seen on Friday has stalled near the 4-hour 200-candle moving average (MA), currently at 1.1321, ahead of the key data release. 

The market-research group GfK's monthly survey, scheduled for release at 07:00 GMT, is expected to show that German consumer sentiment will remain stable in April despite the worsening economic expectations. The EUR may pick up a strong bid if the German consumer confidence beats the expected print of 10.8. A weaker-than-expected print, however, could push the spot below 1.13. 

Post-German data the focus will likely shift back to the action in the German and US government bond yields. It is worth noting that the futures on the S&P 500 are currently hinting at risk reset with a 0.30 percent gain. Put simply, markets may be done pricing in the recession signaled by the spread between the US 10-year and three-month yields. 

As a result, the probability of the EUR could rise toward 1.1350, unless the spread between the US 10-year and two-year Treasury yields drops sharply from the current level of 11 basis points. That could lead to another wave of risk aversion, sending the EUR lower. 

Technically speaking, a break below 1.1273 (Friday's low) would signal a resumption of the sell-off from the recent high of 1.1448 and with RSI below 50.00, the breakdown could yield a drop toward 1.12. 

Technical Levels

    1. R3 1.1377
    2. R2 1.1355
    3. R1 1.1334
  1. PP 1.1311
    1. S1 1.129
    2. S2 1.1268
    3. S3 1.1247

 

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