EUR/USD rally stalls on weak bond yields, focus on banking sector woes
Friday’s high of 1.1285 remains unchallenged as the drop in the Eurozone sovereign bond yields on Tuesday ensured the EUR buyers remained on the sidelines.
Europe’s benchmark German Bund yields fell to their lowest level in nearly six weeks at 0.262%, while French equivalents fell below 0.70% for the first time since early January.
EUR/USD closed at 1.1275 on Tuesday and clocked a session low of 1.1266 in the Asian session today.
Satander considers stock sale on Poplar bid
As per the Bloomberg report, “Banco Santander SA is considering a capital increase of more than EUR 5 billion ($5.8 billion) as part of a potential offer for its smaller rival, Banco Popular Espanol SA, according to people familiar with the matter.”
Banco Popular shares have come under pressure this week amid investor concern over capital levels in the country's banking sector.
EUR hasn’t really had a bad time despite renewed banking woes, although the negative news flow could keep the bond yields under pressure and cap gains in the common currency.
Caution likely ahead of Super Thursday
It’s Super Thursday tomorrow as Britons head to the polls, while former FBI chief James Comey is due to testify before the US Congress on Thursday. Meanwhile, the European Central Bank (ECB) is expected to take a more benign view of the economy and potentially close the door to further stimulus.
The EUR bulls are likely to stay cautious ahead of the host of political/economic events scheduled tomorrow.
EUR/USD Technical Levels
A daily close above 1.13 (Nov 2016 high) would open up upside towards 1.1366 (Aug 2016 high). The next major resistance is seen around 1.1489 (trend line sloping downwards from Aug 2015 high and May 2016 high).
On the downside, a break below 1.1211 (23.6% Fib R of May 2014 high - Jan 2017 low) would open doors for a pullback to 1.1162 (May 29 low) and 1.1109 (May 30 low).
Last week’s bullish outside candle signals potential for further upside, although a quick pull back due to a bearish price RSI divergence on the daily chart cannot be ruled out.