Sunday, March 18, 2018
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EUR/USD – 10Y US-German spread widens, bearish chart posture
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  • EUR/USD could extend 3-day losing streak if the yield spread rises in USD-positive manner.
  • Technical charts favor further downside.

The EUR/USD did recovery in Asia to 1.1948 from the two-week low of 1.1915, however, a sharp rise in the US Treasury yield indicates the 10Y US-German spread could rise in USD-positive manner.

The 10-year yield closed above 2.5 percent yesterday for the first time since March 2017. Currently, the spread stands at 209 basis points (bps) and a violation at 209.50 basis points (December high) would open doors for a sharp rise to 215-219 bps. Thus, the uptick in the EUR/USD could be short-lived.

The EUR may find bids if the Bund yields outpace Treasury yields. That said, the technical charts favor further losses in the pair.

EUR/USD Technicals

Bearish inside day reversal (Friday’s bearish inside day candle and a negative follow through this week) indicates a short-term bullish-to-bearish trend change. Further, bearish 5-day MA and 10-day MA crossover indicate the scope for further losses. Thus, support at 1.1885 (38.2% Fib R of Nov low-Jan high) could be put to test.

Chief Analyst Valeria Bednarik writes, “In the 4 hours chart, the 20 SMA gained downward strength above the current level, while the price struggles around a bullish 100 SMA, also with the 50% retracement of the last three-week rally.  In the same chart, technical indicators reached oversold conditions, with the Momentum aiming to bounce but the RSI still heading lower, currently at 27, in line with additional declines ahead toward 1.1875, the 61.8% retracement of the mentioned rally.”

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