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Jun 21 - 11:55 AM

EUR/USD - COMMENT-Growth, Spreads Are Raising EUR/USD Downside Risks

By Christopher Romano  —  Jun 21 - 09:40 AM

EUR/USD turned lower Friday and struck a five session low on higher probabilities April's monthly low is tested due to deteriorating European economic growth and yield spread influences.

June PMIs for Germany, France and the Euro Zone indicated business growth slowed sharply.

The French services PMI fell into contraction territory and Germany's manufacturing contraction deepened.

The slowdown in France may impact the upcoming elections, potentially creating additional uncertainty in the region.

The downbeat data led investors to increase bets on ECB rate cuts, with Euribor futures prices FEIZ4 rallying.

The data likely helped increase the dollar's yield advantage over the euro.

two year yield spreads US2DE2=RR, which EUR/USD is correlated with, widened out to -194bps and approached the June 17 wide.

Further downbeat data and spread widening could help weigh down EUR/USD.

Technicals highlight downside risks.

Daily and monthly RSIs are falling and are not oversold, which implies downward momentum remains.

EUR/USD's hold below the 10-DMA and daily cloud reinforce bearish signals.

April's low is likely targeted by bears.
A break of that low could trigger stop-loss selling and an eventual test of the 1.0450/1.0500 zone.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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