EUR/USD - US-German yield spread rises & Vols drop, slow decline on the cards?

Widening US-German 10-year yield spread likely keep EUR under pressure
Vols continue to drop ahead of the ECB

Omkar Godbole FXStreet Contributor

EUR/USD traded in the narrow range of 1.1790-1.1740 on Tuesday as the widening US-German yield spread capped gains. The currency pair was flatlined in Asia around 1.1750 levels in Asia.

Yield spread at highest since June 12

The difference or the spread between the US 10-year treasury yield and the German 10 year bund yield currently stands at 194.4 basis points; its highest level since June 12.

Vols drop

The one-month ATM volatility continues to lose height. It topped out at 8.47 in early September and now hovers around 6.55 levels.

The rising yield spread and the decline in volatility indicates the EUR/USD could keep trade in the sideways manner with a bearish undertone ahead of tomorrow's ECB decision.

EUR/USD Nov expiry options open interest activity shows increasing demand for put options. Thus a drop to the head and shoulders neckline level of 1.1660 cannot be ruled out.

Focus on US durable goods orders

A better-than-expected US core durable goods orders figure could help the US 10-year treasury yield build momentum above the key resistance of 2.4 percent. That would open doors for a another leg lower in EUR/USD.

EUR/USD Technical Levels

The spot was last seen trading at the 1-hour 100-MA support of 1.1757. A break below 1.1725 (Oct 23 low) would expose 1.1668 (100-DMA) and 1.1660 (head and shoulders neckline). An end of the day close below 1.1660 would open up downside towards 1.1228 (target as per the measured height method).

On the higher side, a move above 1.1789 (1-hour 200-MA) if accompanied by narrowing of the US-German yield spread, could yield a sustained rally to 1.1832 (Sep 29 high) and 1.1846 (50-DMA).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bearish	Neutral	Shrinking
1H	Bullish	Neutral	Low
4H	Bearish	Neutral	Low
1D	Strongly Bearish	Neutral	Low
1W	Bearish	Neutral	Shrinking
Updated Oct 25, 03:15 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.

AUD/USD turns south toward 0.6900 as USD firms up

AUD/USD sees fresh selling and drops toward 0.6900 in late Asian trading on Monday, as renewed US Dollar strength weighs on the pair amid lingering Middle East and Russia-Ukraine geopolitical tensions. Focus remains on Oil prices, Treasury bond yields, and RBA expectations for fresh trading impetus in the major.

USD/JPY retakes 158.00 amid hawkish BoJ bets, firmer USD

USD/JPY erases losses and retakes 158.00 in the Asian session on Monday, trading within a one-week-old range. Geopolitical uncertainty continues to underpin the US Dollar, despite fading Fed rate hike hopes, supporting the pair's rebound. However, further upside could be capped by hawkish BoJ expectations and looming intervention risks that could support the Japanese Yen.

Gold extends its struggle below $4,200

Gold clings to recovery gains near $4,150 early Monday, maintaining last week’s range. US Dollar reverts to 17-month highs despite receding Oil prices, Treasury yields, and Fed rate hike bets. Gold’s technical picture appears skewed to the downside in the near term.

Why the US Dollar keeps climbing despite weaker jobs data

The US Dollar’s (USD) rally remained everything but abated, climbing for the third consecutive week and reaching levels last seen in April 2025. The move higher came on the back of a mixed performance in US Treasury yields, extending their rally in the belly and long end of the curve while losing some momentum at the short end.

WTI drops to near $89.00 as G7 taps emergency reserves

West Texas Intermediate oil price extends its losses for the second successive day, trading around $89.30 during Asian hours on Monday. Crude oil prices experienced a decline after G7 nations agreed to release 100 million barrels of crude and diesel from emergency reserves, pledging to avoid energy export restrictions following pressure from US President Donald Trump.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082. The decline reflects a powerful combination of US Dollar strength, geopolitical uncertainty and renewed concerns about Europe's exposure to higher energy prices.