EUR/USD defends key support, focus on US Treasury yields

  • EUR/USD is attempting a bounce from the 50-day average support. 
  • US 10-year yield has pulled back from three-month highs. 
  • Risk-off, if any, could bode well for the EUR. 

EUR/USD fell for the fourth straight day on Thursday but defended the widely-tracked 50-day average support. A bounce could be seen as Treasury yields are pulling back amid mild losses in the US index futures. 

The common currency faced selling pressure on Thursday, as expected, and dived to the 50-day average support at 1.1038.

The US treasury yields spiked, sending greenback higher on renewed U.S.-China trade optimism, triggered by reports that both countries will cancel some existing tariffs if phase one trade deal is reached. Notably, the US 10-year yield rose from 1.80% to 1.97% – the highest level since Aug. 1.

The optimism, however, faded somewhat during the Asian trading hours on reports stating that internal disagreements in the Trump Administration are stalling a sign-off on the deal. Further, White House adviser Peter Navarro weakened the bid tone around the risky asset with his comments that there is no agreement at this time to remove any of the existing tariffs as a condition of the Phase One deal and the final decision rests with President Trump.

Currently, the futures on the S&P 500 are reporting a 0.18% drop and the US 10-year yield is seen at 1.91%, down six basis points from Thursday’s high.

The Treasury yields rallied and the USD drew bids during the recent risk-on rally. So, now with US equity index futures flashing red, Treasury yields may drop, weakening the US Dollar and helping EUR/USD regain some poise.

On the data front, the German trade balance and the US Michigan Consumer Sentiment Index are scheduled for release and could influence EUR/USD. China trade data for October released during the Asian trading hours showed weakness in imports (domestic demand).

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