- Down 0.88% this week, EUR/USD trades near key support.
- The pair risks a deeper drop on dovish ECB talk and softer German yields.
- Continued gains in Treasury yields would add to bearish pressures.
EUR/USD is currently sidelined near the 50-day simple moving average (SMA) at 1.1768, having faced rejection near 1.1790 in early Asia.
The support could be breached if the German 10-year bond yields extend Wednesday’s losses in a EUR-negative manner.
The benchmark yield fell by four basis points to -0.51 after the European Central Bank President Christine Lagarde said the policymakers would mainly look at more emergency bond purchases and cheap loans for banks while putting together its new stimulus package next month.
EUR/USD also declined by more than 0.30% to 1.1745. However, the sellers failed to force a daily close above the 50-day SMA.
Apart from the German bond markets, the EUR could take cues from the final reading of Eurozone’s October Consumer Price Index, Eurozone Industrial Production for September. The ECB head Lagarde and her colleagues De Guindos, Panetta, Schnabel, Mersch, may shed more light on the central bank’s stimulus plans during their speeches later today.
The volatility could pick up following the US Consumer Price Index (CPI) release at 13:30 GMT. The US 10-year treasury yield has gained nearly 20 basis points this week. So far, however, that has failed to translate into a broad-based dollar rally.
However, if the US CPI beats estimates, the focus will likely shift to the hardening of yields, fueling a dollar rally.
Technical levels
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