- EUR/USD navigates within a tight range around 1.1170/60.
- The greenback approaches the key 98.00 handle.
- German data releases next of relevance in the docket.
The shared currency struggles for direction in the middle of the week, taking EUR/USD to a narrow trading range between 1.1160 and 1.1170.
EUR/USD looks to data, yields
Spot is looking to reverse two consecutive daily pullbacks, coming under some downside pressure after being rejected once again from levels beyond 1.1200 the figure earlier in the week.
The move lower in spot so far this week reflects the better note surrounding the greenback against the backdrop of a broad-based decline in global yields. In this regard it is worth noting that yields of the German 10-year Bund are trading in the -0.17% area, levels last seen in July 2016, while their US peers have dropped to the lowest levels since September 2017 below 2.23%, all taking the yield spread below the key 240 pts.
Later in the session German labour market report is due along with the 5-year auction and the speech by BuBa’s J.Weidmann.
What to look for around EUR
Recent data releases in Euroland and Germany have poured cold water over the idea that some healing process could be under way in the region, re-shifting the focus to the ongoing slowdown and its probable duration and extension. This view has been reinforced in recent ECB minutes, where the Council appeared unconvinced about a pick up in the economic activity in H2 2019. That said, the current ‘neutral/dovish’ stance from the ECB is expected to persist for the remainder of the year and probable through H1 2020. The broad-based risk-appetite trends and USD-dynamics should dictate the sentiment surrounding the European currency for the time being, all in combination with the now stalled US-China negotiations and potential US tariffs on EU products. On the political front, Italian politics has resurfaced as a source of uncertainty and volatility, all gyrating around the country’s discomfort with EU fiscal rules.
EUR/USD levels to watch
At the moment, the pair is retreating 0.05% at 1.1154 and faces immediate contention at 1.1142 (low May 21) seconded by 1.1107 (2019 low May 23) and finally 1.0905 (high Mar.27 2017). On the upside, a breakout of 1.1215 (high May 27) would target 1.1230 (55-day SMA) en route to 1.1264 (monthly high May 1).
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