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- The EUR / USD rebound after 61.8% of Fib's key support is supported by tightening bond yield spreads between Germany and the United States.
- The two-year yield spread has reached its lowest level since April 2018 and could further shrink in front of the Fed, helping EUR / USD to move up in the zone of immediate resistance to 1.1335- 1.1350.
The EUR / USD peaked at 1.1344 Friday, its highest level since March 4, as weak US data pushed Treasury yields down.
The US Empire State Manufacturing Industries Index released on Friday showed that manufacturing activity has slowed sharply this month. The index reached 3.7, down 8.8 and exceeded expectations by 10. In response, the 10-year Treasury yield fell below 2.6%, a sign of the year. a further decline from the recent peak of 2.77%.
In addition, the gap between US and German two-year government bond yields fell below 300 basis points – the first since April 2018.
As a result, the greenback has suffered setbacks and could still slip today, as the two-year yield gap is expected to further narrow against the Fed's optimistic expectations.
The US central bank is generally expected to maintain its rates unchanged on Wednesday, but it announces a lower willingness to raise rates by lowering the projected interest rate trajectory to a rise in 2019 and a rise in interest rates. more in 2020.
Thus, the euro could soon cross the zone of immediate resistance of 1.1335-1.1350. This range has capped upward over the past three trading days.
However, as the markets expect a rate cut in 2020, the expectations bar (dovish) is high and the dollar should strengthen if the central bank takes note of the recent improvement in risk sentiment.
Two-year performance gap between Germany and the United States
Technical levels EUR / USD
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