EUR/USD Daily Price Forecast – EUR/USD Range Bound Ahead of US Market Hours amid Decline in Italian Bond Yields

The EUR/USD produced a big green candle on Wednesday, possibly due to a sharp drop in the Italy-Germany bond yield spread and is trading higher once again in early Thursday as the Euro catches a bullish ride thanks to recovering risk appetite through the broader markets. The spread between the 10-year Italian government bond yield and the German 10-year bond yield dropped sharply in the last two days from 296 basis points (bps) to 268 bps, on EU friendly budget remarks. Moreover, the feeling spread indicates that the market pessimism over the Italian budget is receding. As a result, the common currency could remain bid today. As of writing this article, EURUSD pair is trading at flat at 1.1631 after hitting an intra-day high of 1.16587 earlier in Asian market hours.

Falling Spread Between German and Italian Bonds Boost EURO in Broad Market

Besides the ongoing Italian budget noise, it’s pretty quiet going in terms of local drivers for the EUR and Investors seem to have put off chasing any ECB policy normalization story. However, there is little out there that supports the case for long euro, albeit there have been some less negative wires on the political front with respect to Italy and Brexit updates and there have not been any EM nor fresh trade headlines to sink the dollar’s peers so far this week. US Greenback lost some ground on recovering momentum in EURO & GBP however skittish emerging market currencies helped limit the greenback’s retreat.

The dollar may have pulled back from two-week highs but it is expected to stay well supported in the longer term, continuing to garner safe haven bids in the wake of weakness in emerging market currencies. On release front, today’s European calendar remains silent however macro data across key European markets were dovish yesterday while US Trade balance was well in line with expectations. Today’s market hours will see release of ISM Non-Manufacturing PMI, Crude Oil Inventory and ADP Non-Farm employment change data and a hawkish outcome in same could help USD gain upper hand against the shared currency.  Expected support and resistance for the pair are at 1.1629, 1.1585, 1.1530 and 1.1656, 1.1700, 1.1733 respectively.