EUR/USD: Wider US-DE yield spreads and risk-off could cap upside ahead of Fed

The EUR/USD fell on Friday, tracking the 10-year spread between the US and Germany (DE) yield differential.
The wider yield differentials and potential risk aversion in equities could cap upside in the EUR/USD ahead of the Fed.

Omkar Godbole FXStreet Contributor

The EUR/USD created an inverted hammer on Friday, as the weaker-than-expected September Eurozone PMI readings pushed the US-German yield differentials to new highs.

For instance, the spread between the two-year US treasury yield and German two-year bund yield rose to 336 basis points, the highest since 1988. Further, the 10-year yield spread rose to a new 29-year high of 261 basis points.

The yield differentials could widen further in the EUR-negative manner if the German Zew surveys, scheduled for release at 08:00 GMT, disappoint expectations.

The common currency may also come under pressure if the European and US equities respond negatively to a decision by China to scrap trade talks with the US.

At press time, the currency pair is trading at 1.1740.

EUR/USD Technical Levels

Resistance: 1.1785 (Thursday's high), 1.1803 (Friday's high), 1.1852 (June 14 high)

Support: 1.1720 (5-day moving average), 1.1681 (200-hour moving average), 1.1660 (100-day moving average)

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bullish	Neutral	High
1H	Strongly Bearish	Neutral	Low
4H	Bearish	Neutral	Expanding
1D		Neutral	Expanding
1W	Bullish	Neutral	Low
Updated Sep 24, 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.

AUD/USD extends the range play above 0.7200 as traders await US inflation data

AUD/USD is seen extending its consolidative price move above 0.7200 during the Asian session on Thursday amid mixed cues. Rising RBA rate-hike bets keep the Aussie close to its highest level since May 14. However, hawkish Fed expectations and escalating US-Iran tensions offer some support to the US Dollar, capping the currency pair as traders await US inflation figures.

USD/JPY consolidates around 153.50 as bears turn cautious ahead of US inflation

USD/JPY stabilizes above 153.50 during the Asian session on Thursday, but remains near a seven-month low set earlier this week as hawkish BoJ repricing continues to underpin the Japanese Yen. Meanwhile, rising September Fed rate-hike bets and escalating US-Iran tensions help ease US Dollar selling pressure, offering some support to the currency pair ahead of US inflation figures.

Gold eases within range, hovers around $4,360

Gold turned south early in the American session on Thursday, but holds within familiar levels as investors await more clues on US monetary policy. The August US Producer Price Index report and the US Consumer Price Index due on Friday will likely shape the market's tone ahead of the Federal Reserve monetary policy announcement next week.

Raydium's rally signals trend reversal amid network growth, buyback

Raydium maintains a firm bullish tone, posting nearly 9% gains, and extending its 41% rally from Sunday. Solana-based Decentralized Exchange is witnessing a surge in network activity and growth amid new token launches. The technical outlook for Raydium signals a potential upside toward $1.50 as momentum holds firm despite overbought conditions.

Jobs opened the door for the Fed — inflation decides whether it walks through

The latest US jobs report did not end the debate over the Federal Reserve’s (Fed) next move. It may have done something more subtle: it gave policymakers permission to keep their options open. After months of softer labour market signals, August delivered a stronger-than-expected rebound.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.