- EUR/USD has pulled back from highs around 1.0930 to below 1.0850, taking cues from yield spreads.
- EUR/USD was supported in early European trading by the hawkish attitude of the ECB Vice President, but reversed amid a rally in US yields.
- With the pair rejecting its 21 DMA, the bears will be looking at a short-term test of yearly lows around 1.0750.
Movements in yield spreads based on central bankers’ rhetoric dictated the price action of the EUR/USD Thursday. Comments from ECB Vice President Luis de Guindos, who usually leans towards dovishness, earlier in the European morning regarding the possibility of a lift-off in July, sparked a rally in euro zone yields that lifted EUR/USD up to 10935.
However, since the start of US trading, US yields have picked up some bullish momentum amid the Fed’s aggressive line policy, triggering a reversal below 1.0850. A strong weekly US jobless claims report, a disappointing US Philadelphia Fed manufacturing survey and a slightly better-than-expected Eurozone consumer confidence survey had little impact on the pair. .
The pair is now trading with modest losses of around 0.1% at 1.0835. Attention now turns to upcoming comments at 1800 BST from the heads of the Fed and ECB and it looks like the focus will remain on the policy divergence between the two banks.
After the pair rejected its 21 DMA below 1.0950, short-term bears will watch for a push lower towards yearly lows around 1.0750. In the medium term, the bears will be watching for a test of the 2020 lows in the 1.0630 area.
Technical levels
Source: Fx Street
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