Yahoo Finance EUR/USD Price Prediction – Euro Gains Ground Ahead Of The Weekend
Key Insights
Germany’s Business Climate remains under pressure.
Weak economic data from Europe failed to put pressure on EUR/USD this week as traders focused on the pullback in Treasury yields and Powell’s testimony.
A move below 1.0500 may trigger a sell-off.
Germany’s Economy Remains Under Pressure
EUR/USD is moving higher today as traders increase their long positions after an unsuccessful test of the 1.0500 level.
Following the disappointing flash readings of Manufacturing PMI and Services PMI reports, Germany released Ifo Business Climate report. The report indicated that Business Climate declined from 93 in May to 92.3 in June, compared to the analyst consensus of 92.9.
The recent reports showed that Europe’s leading economy has recently found itself under material pressure. This pressure will likely increase in the upcoming months due to high energy prices.
At the same time, it should be noted that negative economic data from Europe did not put additional pressure on the European currency. At this point, it looks that EUR/USD traders believe that some economic weakness is already priced in.
Watch The Bond Market Dynamics
The yield of 10-year Treasuries has recently peaked near 3.50% and pulled back towards 3.10%. Similar moves have been experienced by Germany’s 10-year government bond yields, which pulled back below 1.50% after an unsuccessful attempt to settle above 1.80%.
Interestingly, the spread between 10-year Treasuries and German 10-year bonds is almost the same compared to the levels that were seen back at the beginning of this year.
At the same time, the spread with the 10-year Italian bonds has widened significantly as Italy’s bond prices dropped on worries about the health of the country’s economy.
It remains to be seen whether the problems of weaker EU countries like Italy and Greece will allow EUR/USD to stay above the 1.0500 level.
This week, traders reacted to the pullback in Treasury yields, which put some pressure on the American currency. Next week, traders will focus on the Euro Area Inflation Rate report, which is expected to show that Euro Area Inflation Rate reached 8.3% in June.
Most likely, trading will be volatile in the days ahead of the report. In case EUR/USD settles back below 1.0500, selling may intensify.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire