- EUR/USD looks north as the dollar takes a beating against most currencies.
- Yuan’s rally and risk-on action look to be weighing over the greenback.
- A continued rise in the US bond yields could stall the dollar sell-off.
The currency pair is currently trading near 1.1777, representing a 0.17% gain on the day.
The offshore Chinese yuan’s (CNH) rise to a fresh 18-month high of 6.7022 looks to be powering the latest round of selling in the greenback.
Apart from that, continued expectations for additional US fiscal stimulus and the resulting risk-on action in the global equities could be weighing over the safe-haven US dollar.
EUR/USD looks set to challenge the 50-day simple moving average hurdle at 1.1799 during the day ahead unless there is a sudden risk-off event, in which case, the dollar will likely pick up a bid.
That said, traders should keep an eye on the 10-year US treasury yield, which clocked a four-month high of 0.797% earlier this week.
So far, the exchange rate has ignored the developments in the bond markets. However, if the 10-year US yield continues to rise, the focus will likely shift to the widening US-German yield differential. In that case, the shared currency will likely have a tough time scaling the 50-day SMA hurdle.
According to Robin Brooks, Chief Economist at the Institute of International Finance (IIF), and former managing director of foreign exchange strategy at Goldman Sachs, the US yields are rising due to the massive US fiscal deficit and could draw buying pressure for the US dollar.
The Eurozone data calendar is light on Friday. Hence, the pair is at the mercy of the broader market sentiment and the action in the US yields.
Technical levels
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