30 Apr 2015
EUR/USD supported by narrowing UST and bund yield spread – Growth Aces
FXStreet (Barcelona) - With Eurozone bond yields rising on rising inflation, The Growth Aces Research Team, views that the narrowing yield spread between USD and EUR will support the single currency, hence remain bullish on EUR/USD, targeting 1.1307 levels.
Key Quotes
“The EUR/USD had rallied on Wednesday as the surprisingly soft US GDP data weighed on the USD. The Federal Reserve's post-meeting statement said the economic slowdown was probably transitory.”
“The EUR/USD rally is continued today after Eurozone bonds yields rose on easing deflation fears. The Eurozone ended four months of deflation in April with consumer prices unchanged from year-ago levels. Core inflation, which excludes volatile energy and unprocessed food costs, was unchanged at 0.6% yoy.”
“We expect inflation to rise gradually in the coming months. We will see stronger acceleration in CPI in the fourth quarter this year due to base effects.”
“10-year bond yields for Italy and Spain are now 25-30 bps higher than when ECB’s quantitative easing programme started. Bond yields in France, Belgium, Netherlands, Austria and Finland are already at the same levels when the QE started (or even slightly higher). 10-year German Bund yields are getting closer to levels seen before the ECB started buying bonds.”
“The spread between US Treasuries yields and German Bund yields has narrowed. This situation supports EUR/USD rises.”
“A rise in bond yields may result from the lack of liquidity in government bonds now that the central bank has snapped up large portions of the stock of debt with its quantitative easing programme. However, bonds sell-off has a global character. U.S. Treasury yields also rose, with below-forecast economic growth data and no sign of an early rate hike from the Federal Reserve.”
“We are looking to buy EUR/USD at 1.1040. If the order is filled the target will be above 100-dma, currently at 1.1307, but below strong resistance level of 1.1380 (high on February 26).”
“Resistance: 1.1248 (high Feb 27), 1.1280 (76.4% of 1.1534-1.0457), 1.1307 (100-dma)”
“Support: 1.1072 (session low Apr 30), 1.0960 (low Apr 29), 1.0924 (55-dma)”
Key Quotes
“The EUR/USD had rallied on Wednesday as the surprisingly soft US GDP data weighed on the USD. The Federal Reserve's post-meeting statement said the economic slowdown was probably transitory.”
“The EUR/USD rally is continued today after Eurozone bonds yields rose on easing deflation fears. The Eurozone ended four months of deflation in April with consumer prices unchanged from year-ago levels. Core inflation, which excludes volatile energy and unprocessed food costs, was unchanged at 0.6% yoy.”
“We expect inflation to rise gradually in the coming months. We will see stronger acceleration in CPI in the fourth quarter this year due to base effects.”
“10-year bond yields for Italy and Spain are now 25-30 bps higher than when ECB’s quantitative easing programme started. Bond yields in France, Belgium, Netherlands, Austria and Finland are already at the same levels when the QE started (or even slightly higher). 10-year German Bund yields are getting closer to levels seen before the ECB started buying bonds.”
“The spread between US Treasuries yields and German Bund yields has narrowed. This situation supports EUR/USD rises.”
“A rise in bond yields may result from the lack of liquidity in government bonds now that the central bank has snapped up large portions of the stock of debt with its quantitative easing programme. However, bonds sell-off has a global character. U.S. Treasury yields also rose, with below-forecast economic growth data and no sign of an early rate hike from the Federal Reserve.”
“We are looking to buy EUR/USD at 1.1040. If the order is filled the target will be above 100-dma, currently at 1.1307, but below strong resistance level of 1.1380 (high on February 26).”
“Resistance: 1.1248 (high Feb 27), 1.1280 (76.4% of 1.1534-1.0457), 1.1307 (100-dma)”
“Support: 1.1072 (session low Apr 30), 1.0960 (low Apr 29), 1.0924 (55-dma)”