Will EUR/USD regain the bid tone on falling US-German 10-year yield spread?

Omkar Godbole FXStreet Contributor

The EUR/USD dropped to an Intraday low of 1.1392 on Wednesday before ending the day at 1.1411. The common currency failed to strengthen despite a sell-off in the USD following Yellen’s testimony.

US-German 10-yr yield spread is at lowest since early November

The difference between the US 10-year Treasury yield and German 10-yr Bund yield currently stands at 1.7284%; the lowest since the first week of November. Moreover, the spread has been steadily declining late Dec/early January. It stood at 1.832 at the beginning of the current week and fell to 1.743 yesterday.

The EUR/USD has been closely following the yield spread (inverse relationship) since January, although Wednesday’s weakness in the yield spread failed to lift the EUR/USD pair.

ECB officials express caution about inflation

The EUR may have underperformed on Wednesday due to a number of ECB officials expressing caution about inflation and its role in the ECB's policy normalization. The next move in the EUR/USD is more likely to be determined by the upcoming inflation data.

The spot may regain bid tone today if the yield spread continues to narrow further. A weaker-than-expected US PPI and dismal weekly jobless claims (due at 12:30 GMT) could weigh over the USD as well. Traders should also keep an eye on Day 2 of Yellen testimony, although it is more likely to be a repeat telecast of yesterday’s dovish take on interest rates.

EUR/USD Technical Levels

FXStreet Chief Market Analyst Valeria Bednarik writes, “The downward potential remains limited according to the 4 hours chart, as the price settled a few pips above a still bullish 20 SMA, whilst technical indicators are currently bouncing from their mid-lines, after correcting overbought conditions reached earlier on the day. The pair has an immediate support in the 1.1380/90 region, where buying interest surged ever since the week started, followed by a daily ascendant trend line currently around 1.1340.”

Source: Reuters

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Slightly Bullish	Overbought	High
1H	Bearish	Neutral	Low
4H	Bullish	Neutral	High
1D	Bearish	Neutral	Shrinking
1W	Bullish	Overbought	High
Updated Jul 13, 03:00 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 consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

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.