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.
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).
Author
FXStreet Team
FXStreet
