It's Greece again... EUR/USD eyes Greek-German yield spread

Omkar Godbole FXStreet Contributor

And just when you thought nothing can go wrong with the Eurozone now, we have Greece issue back in the limelight.

EUR/USD was offered to one-week low of 1.1122 levels in Asia after German newspaper Bild reported that Greece is threatening to opt out of next payment without a debt deal if creditors cannot agree on debt relief.

Greece issued a ‘panic warning’ on Monday that it could be thrown deeper into recession if the debt deal is blocked at next talks to be held on June 15.

Focus on Greek-German yield spread

The difference between Greek and Periphery government bond yields and the safe haven German bund yields could spike. In the past, the widening of the yield spread during times of stress (Greek crisis, Spain debt crisis in 2012) led to a sell-off in the EUR/USD.

Moreover, the drop in the German yields also means a widening of the US-German yield spread, which is positive for the US dollar.

The EUR could extend the Asian session losses if the Greek-German yield spread widens. Moreover, widening of the yield spread would be an indirect signal that the Greek issue is heating up... Again! As of Friday, the 10-year Greek-German yield spread was 568 basis points.

Later in the day, the US personal spending data could affect the treasury yields and the overall demand for the US dollars.

EUR/USD Technical Levels

A break below 1.1103 (23.6% Fib R of Apr low - May high) would open up downside towards 1.1069 (4-hour 100-MA) and 1.10 (key psychological level + 38.25 Fib R of Apr low - May high). A daily close below 1.10 would signal the rally from the April low has ended.

On the other hand, resistance is seen at 1.1179 (5-DMA + 10-DMA), which, if breached would open doors for a revisit to 1.1268 (May 23 high). A daily close above the same would signal continuation of the rally from the April 10 low of 1.0569 and could yield 1.1366 (Aug 2016 high).

Note - The daily RSI continues to slope downwards from the overbought region. The 4-hour RSI is below 50.00 (bearish territory) and pointing downwards.

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Strongly Bearish	Oversold	High
1H	Strongly Bearish	Oversold	High
4H	Strongly Bearish	Oversold	Low
1D	Bearish	Neutral	Expanding
1W	Bullish	Overbought	Expanding
Updated May 29, 22:45 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.

GBP/USD holds range below mid-1.3600s amid Fed risks and Iran tensions

The GBP/USD pair extends its sideways consolidative price move for the second straight day, and trades around the 1.3630 area during the Asian session. The US Dollar is looking to build on its modest recovery from the lowest level since May 14, and is acting as a headwind for the currency pair. The lack of follow-through selling warrants some caution for bearish traders.

EUR/USD gains support amid hawkish ECB expectations, subdued US Dollar

EUR/USD inches higher after posting minor losses in the previous day, trading around 1.1670 during the Asian hours. The pair finds support as rising oil prices, elevated bond yields, and escalating Middle East tensions drive Eurozone inflation concerns. These factors have boosted expectations for a more hawkish stance from the European Central Bank, which is widely anticipated to deliver a 25-basis-point rate hike in September.

$4700 tested as Gold pulls back but bullish potential remains intact

Gold has pulled back sharply from fresh 15-week highs of $4,697, snapping a two-day uptrend in Asia on Tuesday. The US Dollar (USD) holds onto recovery gains, capping further upside in the bullion.

Bitcoin tops $80,000 as US Treasury fights high yields – AERO, VIRTUAL rally

Bitcoin extends gains above $80,000 as broader market risk-on sentiment persists. The scarce asset could extend its rally as the US Treasury combats high yields in the long-dated bond market, with further interventions on the horizon. Aerodrome Finance (AERO) and Virtuals Protocol (VIRTUAL) emerged as top performers over the last 24 hours.

The forex market is switching to a ‘debasement trade’

The US dollar has stabilised near three-month lows thanks to a rapid recovery in Treasury bond yields. Yields on 30-year bonds are returning to the levels seen following the Treasury’s announcement that it was increasing the minimum purchase volume to $4 billion. The greenback got support from falling stock indices, the continued rally in Brent crude, and positive signals from the US economy.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.