EUR/USD: Bears eye 50-DMA amid widening French/German yield spread

EUR/USD is on a declining trend for the third straight session, extending its corrective slide from the recent rally to fresh eight-week tops reached at 1.0831. The spot has lost more-than 150 pips so far this week, and now remains exposed to further downside risks towards 50-DMA support placed at 1.0590 in near-term.

The picking-up in buying interest seen around the greenback versus its six main competitors over the last few trading sessions amid unwinding of Trump trades, has propelling the renewed selling bias in EUR/USD.

Further, the shared currency remains weighted by mounting political concerns in the Euro area economies – France and Germany, with elections round the corner. Reuters reported that lingering concerns over French elections pushed French/German yield spread out to 79 bps, widest since Nov 2012. Hence, widening bonds yield differentials between the French 10-year government bonds and 10-year German bund yields favor the EUR shorts.

From the technical perspective, Valeria Bednarik, Chief Analyst at FXStreet noted, “Technically, the pair retains the weak tone seen on previous updates, and is poised to extend its decline according to intraday readings, given that in the 4 hours chart, indicators continue heading south near oversold territory, whilst the 20 SMA is about to cross below the 100 SMA, both above the 1.0700 price zone.”

“The pair has an immediate support around 1.0620, where it has the 200 SMA and the low set on January 30th. Below the level, the decline can pause around 1.0590, but an extension lower should result in a test of the 1.0565 level, the 23.6% retracement of the November/January decline. The immediate resistance is the session high around 1.0665, with a recovery beyond it favoring an advance up to 1.0700/10,”Valeria added.