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  • EUR/USD bears are struggling to extend Thursday’s bearish move despite sustained risk-off. 
  • The two-year US-German bond yield spread hovers at five-year lows in the EUR-supportive manner. 
  • Potential risk reset, as suggested by the US index futures, could draw bids for the single currency. 

EUR/USD’s downward move looks to have stalled despite the risk-off tone in the equity markets. The shared currency could be benefitting from the developments in the bond market.

The currency pair is trading near 1.1294 at press time, having defended the ascending or bullish 10-day simple moving average (SMA) support of 1.1276 during the Asian trading hours. 

The pair’s recovery from the key SMA support may look confounding given the investors are shunning risk and buying safe havens like the US dollar and the Japanese yen on renewed concerns that the recovery could take years and a potential second wave of the coronavirus outbreak would cause bigger economic damage. 

The sustained decline in the US-German two-year bond yield spread may be keeping losses in EUR/USD under check. The two-year yield fell to a five-year low of 79 basis points on Thursday, having started the year at levels above 200 basis points. 

Also, the futures tied to the S&P 500 are currently reporting a 1.2% rise. The index futures are essentially suggesting that Wall Street could take back some of the losses suffered on Thursday. The index fell by nearly 6% on Thursday. 

EUR/USD may rise above 1.1320 if the uptick seen in the S&P 500 futures leads to risk reset during the European trading hours. On the data front, the Eurozone Industrial Production for the month of April is scheduled for release at 09:00 GMT. Meanwhile, across the pond, the focus would be on the Michigan Consumer Sentiment Index (Jun). 

US-German two-year yield spread

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