- It appears that the markets are already entering holiday mode, with the movement in the major currency pairs coming to a standstill.
- EUR / USD is currently consolidating near 1.1770, just below the session highs of 1.1780.
- USD weakness due to lower US government bond yields was the main driver for the pair on Thursday.
It appears that the markets are already entering holiday mode, with the movement in the major currency pairs coming to a standstill. Keep in mind that tomorrow is Good Friday, which means that most countries of Christian heritage (including the USA, Canada, most of Europe, Australia and New Zealand) have a public holiday, which which means market closings. There will be some flow from Asia in the next few hours as market participants based in China, Japan, and South Korea etc. come into play, but volumes are likely to be lower than usual.
EUR / USD is currently consolidating near 1.1770, just below the session highs of 1.1780. It appears that the end of the week (for most market participants, anyway!) Came too early and limited the pair’s recovery just when it was starting to look promising; The EUR/USD it will close in green for the second consecutive day, the first time that it has been able to spend consecutive days in green since the first half of March. Currently, the pair is trading with gains of around 40 pips or just over 0.3%.
Performance of the day
US government bond yields have been falling during Thursday’s session. 10-year yields are currently below 7 basis points to just under 1.68%, while 30-year yields have plunged more than 8 basis points below 2.35%. Real returns are also lower, with 10-year TIPS just over 4 basis points below the session, down -0.67%. No specific fundamental catalyst or news can be pinpointed to explain the move. Rather, it appears that after a torrid first quarter during which US government bonds were hit, market participants are taking the opportunity at the start of the new quarter to adjust their positioning a bit; on Thursday this appears to have come in the form of squaring short positions / profit taking.
Whatever the reason for the drop in US government bond yields, it is helping risk appetite (stocks and most commodities are higher) and hurting the US dollar, already rate differentials between the US and the G10 fall. This is the main reason why the EUR / USD has been able to regain ground on the day. In fact, the strength of the pair appears to have little to do with the euro, although some market commentators have pointed to the final Eurozone Markit Manufacturing PMI data released early in the European session as a positive catalyst (polls were slightly better than expected). In another euro zone, ECB officials have been sounding dovish, but this was to be expected and did not seem to hurt the euro; Chief economist Lane pointed to short-term uncertainties and downplayed inflation risks and the ECB’s Weidmann pointed to risks to the bank’s 2021 growth forecasts amid the recent tightening of lockdown restrictions.
In terms of what awaits the couple; Despite the US market closures, the Bureau of Labor Statistics will still release the latest US employment data on Friday. The reaction in the few international markets that are still open is likely to be very volatile amid low volumes. There are chances that the main driver of the pair will remain on the USD side of the equation for the next several weeks, and the main question is whether and whether US government bond yields can resume their steady rise. continuing to support the dollar is undoubtedly at the expense of countries like the euro.
Technical levels
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