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EURUSD: euro fishes for support near 1.1700 handle

The EURUSD pair dropped 0.42%, to 1.1714 on Tuesday, March 30. The euro declined amid a spike in UST yields to 1.77%. Yields rose on the back of quick US economic recovery expectations fueled by new fiscal stimulus and successful vaccination rollout. Joe Biden is scheduled to unveil a massive infrastructure spending plan later today.

Pressure on the euro built due to a widening spread between German and US bond yields. Investors expect the US economy to recover faster than Europe’s. Lockdowns in France and Germany have obscured the short-term outlook for the European economy. Furthermore, dollar demand gained ground on fallout fears after the default by hedge fund Archegos Capital.

Todays macro agenda (GMT 3)

  • 10:55 Germany: unemployment change and unemployment rate (March)
  • 12:00 Eurozone: inflation rate (March)
  • 15:15 US: ADP employment change (March)
  • 15:30 Canada: GDP (January) and PPI (February)
  • 16:00 Switzerland: NBS quarterly inflation report
  • 16:45 US: Chicago PMI (March); 17:00 pending home sales
  • 17:30 US: weekly EIA petroleum status report

Current outlook

The euro dipped to 1.1704 during Asian trading. At the time of writing, the euro was trading at 1.1732. Major currencies are trending higher, except for the yen and the franc. The 10-year UST yield dipped to 1.728%, stopping near the 202-degree angle (1.1702, Gann level).

Antipodeans drew support from stellar manufacturing and non-manufacturing PMIs out of China. Growth in the country’s services sector picked up to 56.3 in March vs. the previous reading of 51.4 and 51.9 expected. The manufacturing PMI in China rose to 51.9 in March, up from 50.6 in February and ahead of the median consensus that called for 51.3.

Following protracted weakness in the euro and Chinese macro data, we can see the prerequisites for an upward correction to 1.1748. Risk appetite is on the rise among traders. The euro recovered to 1.1727, and sterling to 1.3753.

Knee-jerk reactions can be expected ahead of Biden's speech. Biden's economic team has prepared a $3 trln spending package and the details will be made public at 20:20 GMT.

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