EUR/USD - yield differential hits new high & puts gain value ahead of US wage growth data

US-German 2-yr spread hit a new high in USD-positive manner.
EUR/USD risk reversals turned negative.

Omkar Godbole FXStreet Contributor

The European Central Bank (ECB) removed the easing bias from QE language but countered it by saying rates would remain negative for an extended period. Also, President Draghi sounded cautious on inflation.

Consequently, the EUR/USD created a bearish outside day candle yesterday and fell to 1.2298. Further, the spread or the difference between the US two-year yield and the German two-year yield widened to a new record of 282 basis points. Clearly, the current levels in EUR/USD look unjustified.

Further, the EUR/USD one-month 25 delta risk reversals are being paid at 0.05 EUR puts vs. 0.10 EUR calls on March 7. It indicates the implied volatility premium for puts is more than that of calls, i.e. EUR puts are in demand.

So, an argument could be put forward that the rally in the EUR/USD from 1.2154 (March 1 high) has made a temporary high at 1.2446.

Focus on US wage growth figures

An above-forecast reading would boost the odds of a faster Fed tightening and could weigh over EUR/USD. Such a move would add credence to yesterday's bearish outside day candle and suggest the pair has topped out. Meanwhile, weaker-than-expected data could push the spot back to highs seen yesterday.

EUR/USD Technical Levels

As of writing, the spot is trading at 1.2310. A close above 1.2446 (previous day's high) would signal a continuation of the rally from 1.2154 (March 1 low) and open doors for 1.25 (psychological level) and 1.2556 (Feb. 16 high).

On the downside, breach of support at 1.2273 (50-day moving average) would allow a stronger sell-off to 1.2206 (Feb. 9 low) and 1.2154 (March 1 low).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bullish	Neutral	Expanding
1H	Bullish	Oversold	Shrinking
4H	Bullish	Oversold	Shrinking
1D	Strongly Bearish	Neutral	Low
1W	Bearish	Neutral	High
Updated Mar 9, 03:45 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 remains under presure above 0.7000; focus on data

AUD/USD has met some renewed selling pressure on Thursday, coming down from tops near 0.7040 to revisit the 0.7000 region ahead of the opening bell in Asia. The pair’s daily decline has come despite a lacklustre performance in the Greenback at the time when investors continued to monitor developments from the Middle East. Looking ahead, the release of flash PMIs will grab the attention in Oz at the end of the week.

USD/JPY declines to a one-week low; eyes trading range support near 157.50 on weaker USD

USD/JPY drops to a one-week low during Thursday’s Asian session, with bears now awaiting a break below multi-week range support near mid-157.00s before placing fresh bets amid a broadly weaker US Dollar. Despite bets for a December Fed rate hike and Middle East jitters, the recent decline in US bond yields keeps USD depressed near a three-week low. Moreover, hawkish BoJ expectations and intervention risks underpin the Japanese Yen, further weighing on the currency pair.

Gold remains offered just above $4,000

Gold prices resume their decline on Thursday, easing toward the area of two-month lows around $4,050 per troy ounce. Higher crude oil prices have reignited speculation of further tightening by the Fed, supporting the US Dollar and weighing on the precious metal.

The estimates keep falling: Why Bitcoin's quantum countdown is accelerating

The threat that Artificial Intelligence (AI) and quantum computing pose to Bitcoin (BTC) and cryptocurrencies in general is no longer a matter of if hardware will catch up; it is a matter of when. Advances in AI-assisted research are adding a new dimension to the quantum computing threat, although neither technology can currently break Bitcoin’s cryptography on its own.

The Bank of England just got its clearest reason to hike. Here's what it's really watching

UK inflation as measured by the CPI accelerated to 3.5% YoY in September, up from 3.1% in August, according to the Office for National Statistics. This is the highest level since October 2025, exceeding economists' expectations of 3.4% and pushing inflation further from the BoE's 2% target.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.