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EUR/USD runs into 50% Fib hurdle as US-German yield differential slips to 4.5-year low

  • EUR/USD tested a key Fib hurdle above 1.1060 in Aia. 
  • The dollar is on the defensive, courtest of risk-on and weak labor market data. 
  • Declining yield differential favors further gains in EUR/USD. 

EUR/USD is looking to prolong its recent buoyant mood amid a relentless decline in the US-German bond yield spread.

The currency pair is currently trading near 1.1040, representing a marginal gain on the day, having nearly tested 1.1066 a few minutes before press time. That level marks the 50% Fibonacci retracement of the sell-off from 1.1495 to 1.0636.

EUR/USD jumped 1.36% on Thursday, as markets offered dollars, tracking the risk-on action in the equity markets, which was reportedly triggered by the US Senat's approval of the unprecedented $2 trillion fiscal stimulus package.

The American dollar also took a beating on concerns related to the US job market. The US initial jobless claims topped 3.2 million last week, the official data released Thursday showed. The actual figure was double the 1.5 million forecast and four times greater than the prior high set in October 1982.

Thursday's gain was the pair's four-consecutive daily rise. The winning trend looks set to continue with the US-German yield differential hovering at multi-year lows. The spread between the two-year US and German bond yields declined to 0.934  basis points on Thursday. However, if equities turn red, the USD may draw haven bids, yielding a pullback in EUR/USD.

Technical levels

 

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