EUR/USD Price Forecast – EUR/USD Trades Positive Ahead of US Fed Speech

The Euro did well in yesterday’s session, holding on to its position above 1.13275 holding above said level for two trading session and advanced to the upside, reaching 1.13820. However, the pair failed to continue to 1.13945 during the overnight session and pulled back in this morning session to 1.13275 support. For now EURO receives support from the fact that Italy is ready to make some level of concessions to EU in their negotiation with deputy PM Salvini on Sunday stating that no one is stuck to the 2.4% target while his counterpart Di Maio said on Monday that as long as the main measures in the budget remain unchanged then lowering the deficit goal was not a problem.

Reduction in IT-DE Spread Helped EURO Hold Fort Against Firm USD

As of writing this article, the EURUSD pair is trading at 1.1340 up by 0.11% on the day. The bond markets responded positively to DI Maio’s comments. For instance, the spread between the Italian 10-year government bond yield and its German counterpart fell to 285 basis points – the lowest level since Oct. 5 which is one of the major factors that helped EURO maintain uptrend price action despite US dollar gaining momentum in broad market owing to renewed trade war fears between China and USA as US President Donald Trump told Wall Street Journal that he expects to move ahead with raising tariffs on $200 billion in Chinese imports to 25% from 10% currently. US dollar has already began gaining momentum since trading session started for the week over investors concerns of slowdown in global economy with as solid recovery measures are in sight.

The upside in EURO was further limited by an uptick in the 10-year US treasury yields which jumped five basis points to 3.08% likely due to fears that the scheduled speeches by the Fed officials, along with the FOMC minutes may call for a restrictive monetary policy greatly undermining positive influence from reduction in Italy-German spread difference. Fed’s Vice Chair Clarida will be out on the wires at 13:30 GMT later today, Fed bigwigs like Bostic, Evans and George could offer clues on how far the interest rates could rise. However the speech by Fed Chair Powell  is scheduled tomorrow post which a hawkish forward guidance would result is spike in demand for USD while comments that are in line with expectations for 2 rate hikes in 2019 will see existing price action continue moving forward this week.