The Euro’s impressive 8-day rally against the Greenback risks a potential U-turn if tonight’s US Payrolls numbers are better all around. Another limiting factor to further Euro gains is the rise in US 10-year bond yields to March 26 highs at 0.82%. Germany’s 10-Year Bund yield, in contrast was only up 3 basis points to -0.33%, widening the yield differential in favour of the US Dollar. ECB president Christine Lagarde downgraded inflation and growth projections. Lagarde said that the Q2 contraction will be “unprecedented.” The ECB forecasts though were not as weak as the market feared.
We reported earlier this week that speculative Euro long bets remained at elevated levels in the latest Commitment of Traders/CFTC report (week ended May 26). Most analysts are bullish on the Euro with good reason. But there are too many of them, which means a corrective move lower is entirely possible before higher.
EUR/USD has immediate resistance at 1.1370 followed by 1.1400. The next major resistance level for the shared currency against the Greenback is at 1.1500. Immediate support can be found at 1.1300 followed by 1.1260 and 1.1230. Look to sell rallies today with a likely pre-US Payrolls range of 1.1230-1.1350.