EUR/USD - Yield spread tightens, risk reversals rise ahead of the ECB

• Post-Fed drop in T-yields pushed EUR/USD higher.
• Eyes ECB, Draghi might temper EUR bulls.

The post-FOMC weakness in the treasury yields and the resulting sell-off in the US dollar pushed the EUR/USD rose to a one-week high of 1.1844.

Yield spread tightens & Risk reversals rise in an EUR positive manner

The spread or the difference between the US 10-year yield and the German 10-year yield dropped to 203 basis points yesterday from the previous day's high of 208 basis points. Further, the risk reversals show increased demand for the EUR calls. The activity in the related market adds credence to the sharp move higher in the EUR spot.

Focus on ECB

Kathy Lien from BK Asset Management writes, " Mario Draghi's outlook and the central bank updated economic forecasts should be the primary focus for anyone trading ECB as the rate decision itself should be a non-event."

The EUR/USD could extend the post-Fed rally to 1.19 handle if President Draghi sounds upbeat about the economy.

EUR/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, "technical indicators have entered the positive territory, but lost upward strength as the price consolidates near its daily highs, surely not a sign of upward exhaustion. The immediate resistance is 1.1835, a Fibonacci level, ahead of the 1.1870 price zone, were selling interest contained advances last week.

Support levels: 1.1800 1.1750 1.1710

Resistance levels: 1.1835 1.1870 1.1910