EUR/USD touches 1.17 as USD weakness persists

• Risk aversion weighs on T-bond yields.
• US Dollar Index drops to fresh 10-day low below 94.
• The German economy is losing momentum.

After dropping down to 1.1628 following the disappointing data from Germany, the EUR/USD reversed its course and advanced to its best level since May 14 at 1.1702. As of writing, the pair was trading at 1.1697, adding 25 pips, or 0.38%, on the day.

Commenting on today’s report, which showed that current assessment and business climate indexes both eased from their May levels,  IFO economist Klaus Wohlrabe said that findings suggested that the economic boom in Germany was over and added that the concerns over the trade conflict with the United States and the weakness surrounding the global economy weighed on the confidence.  

In the second half of the day, according to the data released by the Federal Reserve Bank of Chicago, the economic activity slowed down in May. A separate report revealed that new home sales increased by 6.7% in May. Nonetheless, the market didn’t show a noticeable reaction to the data as investors remained focused on the political developments in the United States.

On Sunday, a report published in the Wall Street Journal claimed that a government official said  the Treasury Department was planning to stop firms with at least a 25% Chinese ownership from buying technology firms in the U.S. Later in the day,  Treasury Secretary Steven Mnuchin explained that this move would not be specific to China but would apply to all the countries that were looking to steal their technology.

The flight-to-safety ramped up the demand for traditional safe-havens such as the Treasury Bonds and dragged their yields lower and pressured the buck. At the moment, the 10-year reference was down 0.7% on the day and the DXY was losing 0.22% at 93.98. Meanwhile, the tech-heavy Nasdaq Composite Index is was dropping 2.25%.

There won’t be any macroeconomic data releases from the euro area on Tuesday, and the USD valuation is likely to drive the pair’s price action.

Technical levels to consider

The pair could face the first technical resistance at 1.1745 (Jun. 4 high) ahead of 1.1800/05 (psychological level/Jun. 13 high) and 1.1850 (Jun. 4 high). On the downside, supports are located at 1.1680 (20-DMA), 1.1600 (psychological level/Jun. 22 low) and 1.1510 (Jun. 21 low).