Euro’s meteoric rise continues, nears weekly 200-MA, eyes EZ CPI and falling yield spread

EUR/USD ended last week on a positive note at 1.1749; its highest level since early January 2015 after the Germany preliminary CPI rose 0.4% m/m, 1.7% y/y, faster than expected. Across the pond, the inflation numbers - core PCE and employment cost index printed weak, while the consumer spending component of the GDP showed strength. 

US-German yield spread - Lower highs supportive of EUR

Consequently, the spread or the difference between the US 10-year Treasury yield and the 10-year German Bund yield fell to 174 basis points bps) from the previous day’s figure of 178 bps. 

Awaits Eurozone CPI release

Eurozone data due today at 9:00 GMT is expected to show the cost of living as represented by the consumer price index (CPI) rose 1.3% y/y vs. previous figure of 1.3%. The core figure is seen rising 1.2%. 

A better-than-expected CPI would boost German/Eurozone bond yields, leading to a lower US-German yield spread and a stronger Euro. The weekly 200-MA level of 1.1786 could be put to test on a strong Eurozone CPI release. 

On the other hand, a weaker-than-expected CPI release would add credence to the overbought 14-day RSI and yield a pull back in the EUR/USD to 10-DMA support of 1.1654. 

Read: RIsk-off is bad news for EUR

EUR/USD Technical Levels

The spot clocked a high of 1.1761 in Asia and was last seen trading around 1.1735; down 0.14% on the day. A break below 1.1714 (1-hour 50-MA) would open up downside towards 1.1688 (1-hour 100-MA) and 1.1654 (10-DMA). On the higher side, breach of resistance at 1.1761 (session high) could yield a rally to 1.1786 (June 2010 low) and 1.18 (zero levels).