EUR/USD - Yield spread tightens, risk reversals rise ahead of the ECB

Post-Fed drop in T-yields pushed EUR/USD higher.
Eyes ECB, Draghi might temper EUR bulls.

FXStreet Team FXStreet

The post-FOMC weakness in the treasury yields and the resulting sell-off in the US dollar pushed the EUR/USD rose to a one-week high of 1.1844.

Yield spread tightens & Risk reversals rise in an EUR positive manner

The spread or the difference between the US 10-year yield and the German 10-year yield dropped to 203 basis points yesterday from the previous day's high of 208 basis points. Further, the risk reversals show increased demand for the EUR calls. The activity in the related market adds credence to the sharp move higher in the EUR spot.

Focus on ECB

Kathy Lien from BK Asset Management writes, " Mario Draghi's outlook and the central bank updated economic forecasts should be the primary focus for anyone trading ECB as the rate decision itself should be a non-event."

The EUR/USD could extend the post-Fed rally to 1.19 handle if President Draghi sounds upbeat about the economy.

EUR/USD Technical Levels

The spot was last seen trading at 1.1834. A move above 1.1839 (50% Fib R of Dec drop) could yield a rally to 1.1868 (61.8% Fib R of Dec drop) and 1.1880 (Oct. 12 high). On the other hand, a breakdown of support at 1.1804 (100-day MA) could yield a pullback to 1.1762 (50-day MA) and 1.1718 (Dec. 12 low).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bearish	Neutral	Low
1H		Overbought	Expanding
4H	Bearish	Overbought	High
1D	Bullish	Neutral	Low
1W	Bullish	Neutral	Low
Updated Dec 14, 04:00 GMT

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FXStreet Team

FXStreet

EUR/USD looks weak below 1.1800

EUR/USD has slipped back under pressure, breaking through the 1.1800 support and drifting towards the weekly lows near 1.1770 ahead of the opening bell in Asia. The move reflects renewed strength in the US Dollar, with steady geopolitical tensions keeping its demand firm. Moving forward, the release of the German labour market report and flash inflation figures should keep European investors entertained on Friday.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold trims gains, slips back to around $5,170

Gold is now facing some downside pressure, hovering around the $5,170 region on Thursday. The yellow metal surrenders part of its earlier gains on the back of the resurgence of the buying interest in the Greenback. In the meantime, geopolitical tensions in the Middle East continue to limit the downside potential for now.