EUR/USD nears 1.2100 on firmer US Treasury yields ahead of German, Eurozone GDP
- EUR/USD bounces off intraday low, extends Thursday’s pullback from two-month top.
- US Treasury yields help stretch DXY’s bounce off February low.
- Risk dwindles amid mixed updates concerning covid, vaccine and China.
- Odds favoring positive surprise from GDP are higher but a disappointment won’t be taken lightly.
EUR/USD holds lower ground near 1.2117, keeping the previous day’s losses, while heading into Friday’s European session. Although the bond bears keep the US dollar firmer, also exerting downside pressure on the currency major pair, cautious sentiment ahead of preliminary Q1 GDP from Germany and Eurozone restrict the quote’s intraday losses.
US 10-year Treasury yields print second consecutive daily gains after Wednesday’s FOMC meeting tried to reject reflation fears, but could not. The bond bears recently seem to cheer hopes of a faster recovery in the US, portrayed by strong Q1 US GDP, as well as hopes of further stimulus from President Joe Biden's government.
However, lack of clarity over the coronavirus (COVID-19) conditions, amid the Indian variant’s presence in France, as well as uneven vaccinations in the West, seem to check the moves.
On the other hand, European policymakers await upside surprises from the initial GDP prints after strong inflation figures from the region’s growth engine Germany and upbeat sentiment figures for the bloc, published on Thursday.
Amid these plays, stock future print mild losses while US 10-year Treasury yields gained one basis point (bp) to 1.647% by the press time.
Given the presence of German and Eurozone GDP on the calendar, EUR/USD traders may divert from the US dollar moves should the data flash positive surprises. In this regard, FXStreet’s Yohay Elam says, “The euro is the currency market's ‘comeback kid’ – brushing off concerns about a slow immunization effort. Moreover, with the US Federal Reserve extending its bond-buying scheme for longer, the euro benefits from dollar weakness and the broad risk-on sentiment. Therefore, it would only take a minor beat of expectations to jolt EUR/USD higher.”
Read: German GDP Forecast: Is it really so bad? Low expectations open the door to EUR/USD gains
In a case of disappointment, matching the downbeat market consensus, EUR/USD traders may wait for second-tier US figures for clearer direction.
Technical analysis
Thursday’s bearish spinning top on the daily chart suggests a continuation of the pullback moves. However, bulls can stay hopeful until the quote stays above the 13-day-old support line, around 1.2090 by the press time.