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EUR/USD Price Forecast – EURO Flat Near Previous Session Lows on T.Yield Dilemma

Colin First

The EURUSD pair had been trading positive across last week on healthy risk appetite and an upward spike in German Government bond yields. The spread difference between US & DE counterparts shrank in EURO’s favor. However, the pair lost all early gains and hit post FOMC low price levels on Friday owing to dismal EU macro data. A sharp fall in both EU & German PMI’s led to German 10-year government bond yields turning negative for the first time since October 2016. This caused the pair to fall below 1.1300 handle and test monthly lows. But, US Wall Street saw major indices and equities bleed in red resulting in weak USD which helped the pair close above 1.1300 handle on Friday.

German Data Eyed For Short Term Profit Opportunities

As trading session opened for the week, risk-averse investor sentiment pressured EURO back below 1.13 handle. The pair saw rangebound price action in 1.129 handle across Pacific-Asian market hours. However, the US Dollar was unable to capitalize on the downward price action as USD is still affected by US T.Yield curve inversion between 3-month & 10-yr government bond yields which saw spread difference turn negative and resulted in Friday’s Wall Street meltdown. Meanwhile reports from the weekend which stated that “US Attorney General William Bar had cleared President Donald Trump on allegations of Collusion with Russia over Special counsel Robert Mueller reports ” provided some support to USD.

This has resulted in the pair trading steady near previous session lows across Asian market hours. Ahead of European market hours, despite prevalent bearish influence, the pair has managed to find strength over the positive forecast for German IFO business climate index. This helped the pair move back above 1.1300 handle post which the pair continued its rangebound price action. As of writing this article, EURUSD is trading at 1.1305 down by 0.06% on the day. On the release front, US calendar remains silent for the day, while the EU calendar will see the release of German business expectations, current assessment, and IFO business climate index which are expected to provide short term directional bias. But the main driving force behind price momentum in immediate and near future trading sessions will be from Bond Yield spread difference dynamics. Expected support and resistance for the pair are at 1.1273, 1.1231, 1.1183/73 and 1.1315, 1.1345, 1.1385 respectively.

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This article was originally posted on FX Empire