EUR/USD consolidates around 1

EUR/USD consolidates around 1.1900 mark, remains vulnerable

  • EUR/USD was seen consolidating the overnight slide from the 1.2000 neighbourhood.
  • A pullback in the US bond yields capped the USD upside and extended some support.
  • Plans to resume AstraZeneca’s COVID-19 vaccine underpinned the common currency.

The EUR/USD pair lacked any firm directional bias and remained confined in a narrow trading band, just above the 1.1900 mark through the Asian session on Friday.

A combination of diverging forces failed to provide any meaningful impetus and forced the pair to consolidate the overnight sharp pullback from the vicinity of the key 1.2000 psychological mark. The US dollar witnessed a dramatic turnaround on Thursday and recovered the post-FOMC losses amid surging US Treasury bond yields. This, in turn, was seen as a key factor that prompted some fresh selling around the EUR/USD pair.

Despite Wednesday’s dovish FOMC statement, investors seem convinced that the continuous improvement in economic conditions would force the US central bank to raise interest rates sooner rather than later. The optimistic outlook was reaffirmed by the Fed’s latest economic projections. Moreover, policymakers made no mention of the recent surge in long-term borrowing cost, which kept the US Treasury bond yields elevated.

In fact, yields on the longer-end US government bonds (10-year and 30-year) jumped to new cycle highs on Thursday and provided a strong lift to the USD. The sell-off in the US fixed income, along with a slump in oil prices took its toll on the global risk sentiment and further benefitted the greenback’s relative safe-haven status. However, a modest pullback in the US bond yields held the USD bulls from placing fresh bets.

The shared currency also found some support after European nations announced plans to resume using AstraZeneca’s COVID-19 vaccine on Thursday. This makes it prudent to wait for some follow-through selling before traders positioning for any meaningful downside for the EUR/USD pair. That said, repeated failures near the 1.2000 mark favours bearish traders and supports prospects for additional weakness in the near-term.

There isn’t any major market-moving economic data due for release on Friday, either from the Eurozone or the US, leaving the EUR/USD pair at the mercy of the USD price dynamics. The US bond yields will continue to play a key role in influencing the USD. This, along with the broader market risk sentiment might produce some impetus to the major.

Credit: FX Street

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