Release Time:2018-06-04 02:05
EURUSD (1.1676) • EUR is up modestly vs. the USD and outperforming most of the G10 currencies with the exception of NOK and SEK, once again attempting to extend this week’s recovery through the psychologically important 1.17 level. Sentiment is dominating as market participants breathe a sigh of relief at the formation of a new government in Italy and the ouster of Spanish PM Rajoy. ECB rate expectations are recovering and German yields are rising, narrowing interest rate differentials in a EUR-supportive manner. The Italy-Germany 10Y spread has also narrowed considerably. Risk reversals are showing a remarkable decline in the premium for protection against EUR weakness (vs. both the USD and JPY). This week’s stronger than expected CPI data (France, Germany, euro area) should support plans for ECB normalization into the next (June 14) meeting and the latest PMI’s are suggestive of healthy, above -trend levels of growth.
EURUSD short-term technicals: neutral-bullish—EUR is firm, rising for a third consecutive session and threatening an extension of this week’s bullish reversal through the psychologically important 1.17 level. Bearish momentum indicators have faded from oversold levels and DMI’s are converging to suggest a shift in the balance of risk. The 9 day MA (1.1675) has been broken and near-term resistance appears limited between 1.1720 and the 21 day MA (1.1784). Near-term support is now expected at 1.1650.