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  • US dollar index gains amid post-holiday thin liquidity.
  • US-EU macro divergence favors US-DE yield spread.
  • Focus remains on the US new home sales and Eurozone consumer confidence.

The bears are seen taking back charge in the European session, now pushing the EUR/USD pair towards the lower bound of today’s trading range near 1.1250 region, as markets prefer to hold the US currency amid widening 10-year US-German (DE) government bond yield spread.

The rise in the US-DE yield differential is mainly in response to the US-Eurozone macro data divergence, especially after the latest upbeat US retail sales report eased the US economic growth concerns while the disappointing German and Eurozone manufacturing PMI numbers re-ignited Euro area slowdown fears.

It’s worth noting that “the yield spread, which stood at 241 basis points on March 22, rose to 259 basis points on Friday, the highest since December”, Omkar Godbole, FXStreet’s Analyst explains.

In the day ahead, the shared currency remains exposed to further downside bias should the Eurozone consumer confidence data, due at 1400 GMT, deteriorate in April and weigh further on a potential ECB rate hike. Also, of note remains the US new home sales data for fresh dollar trades.

From a technical perspective also, “that big move could happen to the downside if the bear flag, as  seen in the 4-hour chart – a bearish continuation pattern – is breached to the downside”, Omkar adds.

EUR/USD Technical Levels