Where we are: EUR/USD is currently trading at 1.1655, up 0.21% on the day, having traded in a tight 1.1631-1.1661 range. The Fiber continues to consolidate gains made in early European trade, sitting comfortably above its prior NY close. Resistance looms at the 1.1670 level, while support is seen near 1.1630.
What’s driving it: The Euro is benefiting from a slight dovish repricing in US yields, as the US-DE 10Y spread compresses to +150bp. Domestically, the focus remains on the ECB’s mild easing bias, reinforced by last month’s 25bp rate cut to 2.50%. While the ECB’s Financial Stability Review released at 10:00 CET is unlikely to trigger immediate market reaction, traders are eyeing the June 5th meeting, where a follow-up cut is still on the table contingent on wage tracker softening and services HICP remaining near 3%.
- The Eurozone HICP printed at 2%, a 0.10% drop from the prior reading, while core HICP also fell 0.10% to 2.3%, supporting the dovish narrative.
- The BTP-Bund spread has tightened by 1bp to 72bp, signaling some easing of sovereign stress.
- CFTC data shows net non-commercial EUR positioning at +33,513 contracts, down -6,687 w/w and in the 12th percentile, which suggests limited risk of a long squeeze at current levels.
NY session focus: The key focus for the NY session will be on the overall risk sentiment and any further moves in US yields, particularly at the long end, with the US 10Y currently at 4.468%. Keep an eye on the S&P 500 futures, which are up 0.30% at 7558.00. Key levels for EUR/USD are 1.1630 support and 1.1670 resistance. The trade that’s working is fading dips towards 1.1630. The trade at risk is chasing the rally above 1.1670 without a convincing break. The pain trade for the Fiber is a hawkish surprise from a Fed speaker sparking a US yield surge.