- EUR/USD scored marginal gains on Monday, ending the five-day losing streak.
- The 5-day MA capped gains in Asia.
- The currency pair may pick up a bid if the risk appetite improves, as suggested by the uptick in the S&P 500 futures.
EUR/USD rose 0.10% on Monday, putting an end to the slow five-day losing streak on the back of broad-based USD selling.
The greenback lost ground in the North American session yesterday after the Chicago Fed National Activity index came in at -0.45 for April, missing consensus estimates.
The gains in the EUR/USD, however, were marginal as the US stocks declined on the deepening US-China trade tensions. Also, the yield on the 10-year treasury yield gained three basis points despite the weak data, keeping the EUR/USD gains under check. Fed’s Powell sounded cautious on the corporate debt and its potential negative effects on the economy, in the overnight trade, but failed to move the needle in the FX markets.
The currency pair is currently trading at 1.1163, having faced rejection at the descending (bearish) 5-day moving average (MA) of 1.1172 in Asia.
The Eurozone data docket is light today. As a result, the currency pair is at the mercy of the broader market sentiment, which is showing some signs of recovery with Chinese stocks gaining ground on US’ decision to temporarily ease restrictions imposed on China’s Huawei. The S&P 500 futures are also up 0.4% at press time.
The FX desks may offer US Dollar, helping EUR/USD rise to 1.12 if the risk appetite continues to improve in Europe. That said, Eurozone issues could play a spoil sport. Recent data releases in Eurozone and Germany have poured cold water over the idea that some headline process could be under way, as stated by FXStreet’s Pablo Piovano.
Further, Italy’s fiscal issues have made a comeback in the last few days. EUR/USD will likely face selling pressures despite a potential risk-on in equities if the Italy-German yield differential widens. The spread between the Italy and German 10-year government bond yields was 333 basis points on Monday, having hit a high of 344 basis points last week.