BUZZ-COMMENT-EUR/USD recovery has plenty of hurdles ahead
Feb 25 (Reuters) - Rate differentials are becoming less favourable to the dollar with EU/US spreads trading at levels last seen in November, which justifies the current price action in the U.S. dollar, though the setup is not a clear negative for the greenback with short-term factors potentially providing a modicum of support.
The benchmark 10-year yield fell 10bps during Tuesday’s session, breaking below 4.3% and nearing the 200DMA at 4.24%. Consequently, this has weighed on the dollar across, which once again has led EUR/USD above 1.05.
However, Wednesday is corporate month-end – which occurs two days before the final trading day of the month – where large U.S. corporates often hedge global revenues, typically coinciding with dollar strength. While most notably observed against the yen and sterling, this can still weigh on EUR/USD.
Elsewhere, with another tariff deadline approaching – March 4 – this can also underpin the greenback, particularly if the Trump administration were to enact the levies on Canada and Mexico.
Technically, resistance sits at 1.0530, which has so far kept a lid on EUR/USD. A clean break would open up path for 1.0600-30.
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