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Thomson Reuters
Jun 07 - 02:36 PM
EUR/USD - COMMENT-EUR/USD Downside Limited As Fed, ECB Likely To Diverge
First appeared on eFXplus on Jun 07 - 01:00 PM

EUR/USD bears and the ECB are likely to be disappointed with the pair's outlook after the downside miss to May NFP and AHE as well as the downward revision to April's NFP nLNS7HEF4X.
The disappointing data sent the 10-year U.S. Treasury yield toward 2.05% and the 2-year yield toward 1.77%.
As a result, German-U.S.
2-year spreads are their tightest since November 2017 while 10-year spreads are at their narrowest since April 2018.
Rates markets see not only a near 100% chance of a Fed cut on July 31, but a series of rate reductions moving forward.
Those signals are in stark contrast to the ECB and Draghi.
Although Draghi did say the bank was ready to act if economic conditions deteriorate, the ECB’s stated plan is to keep rates on hold through H1 2020.
Thus, investors are bracing for the Fed to act first, and are likely reducing their dollar long positions, underpinning EUR/USD.
This is evident on the charts with RSI studies strengthening.
EUR/USD bulls likely expect a 200-DMA break and test of the March high.

chart: Click here

chart: Click here

Thomson Reuters IFR Markets


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