EUR/USD extends the decline and approaches 1.0400

• Euro weakened as German bonds soar.
• The dollar firm in a context of risk aversion.
• EUR/USD is targeting 1.0400 and starting to look at the low for the year.

EUR/USD is falling for the third day in a row on Thursday and is approaching 1.0400. The dollar remains firm in a context of risk aversion, while the euro suffers from lower bond yields. The pair fell to 1.0410, hitting a two-week low.

Strong dollar, weak euro

Among major currencies, the euro and Swiss franc were among the worst performers on Thursday, the last trading day of the quarter. Risk aversion continues to drive demand for sovereign bonds.

The German 10-year bond yielded 1.42%, down 6% from Wednesday. The decline in Treasury bonds is more moderate. The rise in the differential is favoring the dollar against the euro. The moves come after European Central Bank officials ratified their intention to raise rates in July and again in September.

With regard to economic reports, a rise of 0.6% of the German retail sales in May and one rise in the unemployment rate from 5% to 5.3%. In the Eurozone, the unemployment rate went from 6.7% in April to 6.6% in May.

Revenue and spending data will be released on Thursday in the US, including the underlying rate of personal consumption expenditure. The latter is an inflation indicator closely followed by the Federal Reserve. In addition, the weekly report of requests for unemployment benefits and the Chicago PMI will be published.

ANDhe technical picture also reflects weakness in the euro. After failing to break above 1.0600, a pullback began which was accelerated on Wednesday with the break below 1.0500. On Thursday the rebound found resistance at 1.0470, another important level, and resumed the lows. Next support is seen at 1.0400 and 1.0380 will follow below.

Technical levels