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Apr 16 - 11:55 AM

EUR/USD - COMMENT-EUR/USD Fate Remains Tied To US Yields

By Christopher Romano  —  Apr 16 - 09:47 AM

EUR/USD edged higher on Friday but was largely consolidating recent gains while below large 1.2000 barriers nL1N2M70JM and the daily cloud base as investors continue to focus on moves in the U.S. interest rate complex.

Risk-on sentiment drove equities and oil higher while the dollar weakened slightly.
Those factors typically buoy EUR/USD but bulls aren't being overly aggressive due to U.S. interest rates.

The 10-year yield US10YT=RR rallied sharply from Thursday's low, threatening to break resistance near 1.590%/1.610%.
December 2022 eurodollar EDZ2 prices fell, erasing much of Thursday's rally.

Dollar buying should intensify if U.S. interest rates extend Friday's rally.
The 1.2000 EUR/USD barrier will remain intact as will the daily cloud base.
EUR/USD then has potential to trade down near the 200-day moving average or even as low as structural support near 1.1850/60.

Alternatively, if this U.S. rate bounce stalls, EUR/USD bulls could drive the pair through the barrier and daily cloud, but options suggest gains will be a grind.

Risk reversals EUR1MRR=FN show only a small vol premium for calls over puts, suggesting limited investor conviction for an upside move.

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eur/usd Click here

UST10Y Click here

EDZ2 Click here

eurvol Click here

Source:
Refinitiv IFR Research/Market Commentary

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