EUR/USD - Down 2% from recent highs, but long-run bull outlook intact

EUR/USD under pressure, possibly due to widening US-German (DE) yield differential.
However, risk reversals show long-term bullish outlook is intact.

Omkar Godbole FXStreet Contributor

The EUR/USD pair fell to 1.2265 in Asia - the lowest level since Feb. 12, tracking the post-Fed minutes rise in the treasury yields and the resulting widening of the US-DE two-year bond spread in the USD positive manner.

As of writing, the currency pair is trading at 1.2280 - down 2 percent from the Feb. 16 high of 1.2556. Currently, the two-year yield spread stands at 277 basis points; the highest level since 1988, according to Reuters data. The spread could rise further in favor of the USD as investors price-in a more hawkish Fed.

Also, the uncertainty surrounding the Italian elections and German SPD vote have strengthened the demand for EUR puts (bearish bets). "Two-week through 1-month expiry risk reversals have shown a growing implied volatility premium for EUR puts (sell EUR) over EUR calls (buy EUR) this week", according to a Reuters report.

However, the long-term outlook remains bullish as the one-year risk reversals are being paid at 0.325 EUR calls (i.e. EUR calls are in demand or call premium is higher than put premium).

As for today, the common currency could take cues from the German IFO readings (due at 09:00 GMT) and bond yield differential.

EUR/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, "In the 4 hour chart, technical indicators have recovered from oversold readings, but the pair remains below its 20 and 100 SMAs, with the shortest crossing below the largest, both around 1.2380, also a Fibonacci resistance. The pair will need to recover beyond the next resistance at 1.2425, to regain its bullish stance, while below 1.2300, chances are of further slumps for this Thursday.

Support levels: 1.2300 1.2260 1.2225

Resistance levels: 1.2380 1.2425 1.2460

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD holds above 1.1750 after mixed PMI data

EUR/USD manages to hold above 1.1750 but struggles to gather recovery momentum on Friday, following the mixed February PMI figures from Germany and the Eurozone. In the second half of the day, Q4 GDP, December inflation and February PMI data from the US will be watched closely by market participants.

GBP/USD recovers above 1.3450 ahead of UK PMI data

GBP/USD is recovering ground above 1.3450 in European trading on Friday, helped by a modest uptick in the Pound Sterling after a bigger-than-expected increase in the UK Retail Sales for January. However, the further upside appears limited in the pair amid persistent US Dollar strength and ahead of key UK and US data.

Gold rises for third day on geopolitical risks, US data eyed

Gold gains some positive traction for the third consecutive day on Friday. The upside potential, however, seems limited amid the mixed fundamental backdrop. Moreover, traders might opt to wait for the key US macro releases – the Advance Q4 GDP report and the Personal Consumption Expenditures (PCE) Price Index – before placing fresh directional bets.

US GDP growth expected to slow down significantly in Q4 after stellar Q3

The United States Bureau of Economic Analysis will publish the first preliminary estimate of the fourth-quarter Gross Domestic Product at 13:30 GMT. Analysts forecast the US economy to have expanded at a 3% annualized rate, slowing down from the 4.4% growth posted in the previous quarter.

Hawkish Fed minutes and a market finding its footing

It was green across the board for US Stock market indexes at the close on Wednesday, with most S&P 500 names ending higher, adding 38 points (0.6%) to 6,881 overall. At the GICS sector level, energy led gains, followed by technology and consumer discretionary, while utilities and real estate posted the largest losses.

Official Trump price approaches breakout with mixed signals from traders

Official Trump (TRUMP) is trading at $3.50 at the time of writing, approaching its upper consolidation range. A breakout from this range could open the door for an upside move. On-chain data shows market indecision, with balanced flows between bulls and bears, signaling a lack of clear directional bias.