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  • EUR/USD hit highest since Feb. 6 and could rise further in the near-term, as US-German (DE) yield differential has dived out of rising wedge pattern.  
  • EUR, however, may find offers in Europe if Bundesbank President and ECB member Weidmann talks dovish and Eurozone sentiment indices print below expectations.  

EUR/USD is looking north as the spread between the 10-year US and German government bond yields looks set to drop in the EUR-negative manner in the near future.  

The benchmark yield differential fell four basis points yesterday, confirming a downside break of a rising wedge pattern. As a result, the spread risks falling in the EUR-positive manner to January lows near 240 basis points in the next few weeks.  

Validating that argument is the fact that markets are now pricing a near 20 percent chance of a rate cut at the Fed’s December meeting.

Technical developments are also EUR-positive. The common currency closed well above the newfound resistance of 1.1370 yesterday, validating the bullish (ascending) 5- and 10-day moving averages (MAs).  

So, the path of least resistance is to the higher side and the pair could break above 1.1407 (61.8% Fib R of 1.1514/1.1234) in the next 24 hours.  

The bullish break above 1.1407, however, may remain elusive if ECB’s Weidmann takes note of the sharp slowdown in the German economy, reinforcing expectations that the ECB won’t hike rates any time soon. Traders could also offer euros on below-forecast Eurozone business and investor confidence numbers.  

The focus would shift to US durable goods orders release in the NY session.  

US-DE 10-year yield spread

Technical Levels