- EUR/USD extends the up move to 1.1200 on Monday.
- Yields of the German 10-year Bunds drop to all time lows.
- US ISM manufacturing for the month of May next on tap.
The bid tone remains intact around the shared currency at the beginning of the week, with EUR/USD briefly testing daily highs at 1.1200 the figure.
EUR/USD now looks to US data, trade
Spot is advancing for the second day in a row on Monday, challenging 5-day peaks in the 1.1200 neighbourhood against the backdrop of heightened trade concerns and declining yields.
In fact, yields of the German benchmark 10-year Bund are navigating the area of -0.21%, or all-time lows, following rising concerns on the trade front, particularly after recent threats by President Trump to impose tariffs on all US imports from Mexico. The downtrend in yields have dragged the US-GE spread differential to the 230 pts region, levels last seen in March 2018.
Earlier in the session, final May manufacturing PMIs in Euroland matched the preliminary prints, leaving no room for surprises ahead of the ECB event on Thursday.
Across the pond, the always-relevant ISM manufacturing for the month of May is coming up next.
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 should be once again assessed at the upcoming ECB meeting along with the current ‘neutral/dovish’ stance from the central bank. 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 developments from the trade front including the US, China, the EU and Mexico. On the political front, Italian politics has resurfaced as a source of uncertainty and volatility, with the centre of the debate on the country’s opposition to EU fiscal rules.
EUR/USD levels to watch
At the moment, the pair is advancing 0.23% at 1.1194 and a breakout of 1.1215 (high May 27) would target 1.1220 (55-day SMA) en route to 1.1264 (monthly high May 1). On the other hand, the next up barrier lines up at 1.1116 (low May 30) seconded by 1.1107 (2019 low May 23) and finally 1.0905 (high Mar.27 2017).
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