EUR/USD: Inching Higher Amidst Global Geopolitical Concerns, Lower US Yields

Highlights

• Euro gains against dollar due to lower US Treasury yields.
• Concerns rise over geopolitical tensions and global economic fragility.
• German business morale worsens, impacting the euro’s performance.

Overview

The Euro is inching higher against the US Dollar in Monday’s limited trading session. This uptick can be attributed to a decline in US Treasury yields, possibly influenced by a slight safety bid following the weekend’s events. Two-year Treasury yields briefly dipped below 4.70%, about 10 basis points lower than last week’s peak. Traders are keeping a close eye on an upcoming auction of new paper scheduled for later today.

Global Markets Face Turmoil Amidst Russian Mutiny

Over the weekend, global markets faced potential turmoil due to a dramatic but quickly quelled Russian military mutiny. Since the onset of the pandemic and the Russian invasion of Ukraine last year, geopolitical tensions have been a major concern for investors. However, the recent risk of civil war and the potential toppling of Russian President Vladimir Putin revealed even greater instability within the nuclear power than previously assumed.

Traders Perplexed as Moscow Remains Calm

Globat traders find themselves more perplexed than reassured by the events, despite the relief provided by the truce that prevented mutineers from entering Moscow on Saturday. The situation in Moscow remains eerily calm. However, the threat of a power vacuum in a nuclear military power carries obvious risks, even if assessing and pricing the most extreme scenarios is challenging. As a result, many asset managers are adopting a cautious approach. They are awaiting further information to make informed decisions. This cautious sentiment has led to low market volatility, and while the dollar has seen marginal gains, it remains within recent holding patterns.

German Business Woes Cap EUR/USD Gains

Meanwhile, the gains of the EUR/USD has been capped by negative developments in Germany. German business morale worsened in June, signaling challenges for Europe’s largest economy. Euro Zone business growth nearly stalled in June due to manufacturing activity downturn and slow services industry expansion.

Key Events to Shape EUR/USD on Monday

Later today, several events could potentially impact the EUR/USD. These include the release of the Dallas Federal Reserve’s June manufacturing survey, the US Treasury’s auctions of 2-year notes, 3-month bills, and 6-month bills, the European Central Bank Forum on Central Banking in Sintra, Portugal, as well as speeches by Atlanta Federal Reserve President Raphael Bostic, St Louis Fed President James Bullard, and Cleveland Fed Chief Loretta Mester.

Euro Gains Amid Geopolitical Concerns

In conclusion, the Euro is up slightly against the US Dollar, benefiting from lower US Treasury yields and a relatively calm market following the weekend’s events. However, concerns persist due to geopolitical tensions and the fragile state of the global economy, with Germany and the Euroone facing significant challenges. Traders are eagerly awaiting the outcome of key events later today to gauge the short-term direction of the EUR/USD.

Technical Analysis

The EUR/USD is exhibiting bearish sentiment as the current price of 1.0905 is below the 50-4H moving average of 1.0916. This indicates a downward pressure in the short term. The price is still above the 200-4H moving average of 1.0814, suggesting a relatively neutral outlook. The 14-4H RSI at 46.55 confirms the market’s neutral stance. The main support area is defined between 1.0667 and 1.0635, while the main resistance area lies between 1.1006 and 1.1074. Traders should closely monitor the price action to assess whether the bearish sentiment strengthens or if a potential reversal occurs.