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Is the "gold copy" of euro traders coming?
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Hello everyone, today XM Forex will bring you "[XM Forex Market Review]: Is the "gold copy" of euro traders xm-forex.coming?". Hope it will be helpful to you! The original content is as follows:
XM Forex APP News - On Monday (April 28), the euro against German Treasury bonds have always been the first choice for safe-haven funds in the world due to their AAA rating and euro zone benchmark status. On April 28, the 10-year yield of German bonds rose slightly by 3.5 basis points to 2.50%, still at the low end of the recent range of 2.47%-2.90%. This level is down from the 2.84% high when Germany announced large-scale fiscal expansion (including infrastructure and defense spending) in early March, but it still reflects market confidence in the core assets of the euro zone. Analysts from well-known institutions pointed out that the moderate rebound in German bond yields is related to investors waiting for this week's euro zone inflation data (Spain Tuesday, Germany, France, Italy Wednesday) and US economic data (PCE inflation, GDP, non-agricultural areas), and the market lacks a clear direction. Changes in Germany's fiscal policy are the core driver of the German bond market. In March, the new German government planned to significantly increase lending, pushing the 10-year yield of German bonds to 2.84%, and the 10-year interest rate spread in Italy and Germany narrowed to 100 basis points, the lowest since September 2021. On April 28, German Finance Minister Joerg Kukies wrote to the European xm-forex.commission, requesting exemption of EU lending restrictions to increase defense spending, a news briefly boosted German debt demand. Traders believe that Germany's fiscal expansion not only strengthens expectations of the eurozone's economic recovery, but also consolidates German bonds' position as a safe-haven asset, promotes capital inflows and supports the euro. Risk aversion is another key factor in the impact of German debt on the euro. Recent tariff remarks and the situation in Russia and Ukraine have exacerbated market uncertainty, prompting funds to shift from US bonds and other assets to German bonds. In April, German bonds rose to a four-month high against the US dollar due to the sell-off of US bonds and geopolitical risks. Some traders believe that German debt's risk-haven appeal has weakened the United StatesThe relative xm-forex.competitiveness of the dollar assets will benefit from the euro. Kenneth Broux, head of foreign exchange and interest rate research at Societe Generale, pointed out that if US economic data (such as non-agricultural) this week show weak labor market, the market may further bet on the Fed's interest rate cut in June, and funds will continue to flow to German bonds, indirectly supporting the euro. The technical trend of the euro against the US dollar is closely related to the fluctuations in German bond yields. In the past three trading days, the euro has been consolidated in a narrow range of 1.13-1.14, with the latest report of 1.1357, which happens to be near the 200-day moving average (1.1357), indicating that the market is waiting for a directional breakthrough. The Bollinger Band (20,2) shows that the euro fluctuation range is 1.1206 (lower track) to 1.1660 (upper track), and the current price is close to the middle track (1.1432), reflecting the lack of strong momentum in the short term. The MACD (26, 12, 9) indicator shows that DIFF (0.0151) is slightly lower than DEA (0.0156), and the MACD value is -0.0011, indicating that the bulls' momentum is slightly weak, but it has not yet turned into a clear short signal. RSI (14) is 61.8708, which is in a relatively strong neutral area, implying that the euro still has upward potential, but it needs catalysts to push it. The technical signal of German bond yields provides important clues to the euro trend. On April 25, the 10-year yield of German bonds was 2.47%, and rose slightly to 2.50% on the 28th, still lower than the March high of 2.84%. This level echoes the euro-dollar 1.13-1.14 fluctuation range, indicating that the moderate rebound in German bond yields has not triggered an euro breakthrough. Historical data shows that when German bond yields break through 2.8%, the euro often tests resistance above 1.15, such as the euro rose to a high of 1.1572 in March. If the euro zone inflation data exceeds expectations this week, German bond yields may challenge 2.8% again, and the euro may break through 1.14 and test the Bollinger band upper track of 1.1660. In contrast, the US dollar's technical side shows strong but the momentum slows down. Trader discussions further demonstrate the impact of German debt on the euro. Some users pointed out that the interest rate spread between German bonds' two-year yield (1.75%) and 10-year yield (2.50%) and US bonds (3.775% and 4.266%) narrowed, prompting funds to flow to German bonds, and the euro was supported. Other traders believe that the safe-haven attributes of German bonds are particularly prominent in the current tariff remarks and the situation in Russia and Ukraine, and the euro may remain strong in the short term due to German bond demand. An anonymous institutional trader said: "As long as the German bond yield does not quickly break through 3%, the euro will not pull back sharply due to risk aversion to the US dollar. 1.13 is the short-term bottom." However, there are also differences in the market. Some traders are concerned that if the euro zone inflation data is lower than expected this week, expectations of ECB interest rate cuts may heat up, German bond yields may fall below 2.4%, and the euro may test the Bollinger Band lower track of the 1.12. Analysts from well-known institutions believe that the long-term impact of Germany's fiscal expansion will continue to push up German bond demand. Even if the euro pulls back in the short term, it still has the potential to hit 1.18 this year. Future trends outlookDuring the week, the German bond market will be driven by the dual driving of euro zone inflation data and U.S. economic data. If the euro zone inflation data from Tuesday to Wednesday meets or slightly exceeds expectations, the 10-year yield of German bonds may exceed 2.6%, and the euro is expected to challenge the 1.14-1.15 range against the US dollar. Conversely, if inflation data is weak, German bond yields may fall back to 2.4%, and the euro may test 1.12 support. Technically, the 200-day moving average of 1.1357 and the Bollinger band midway of 1.1432 are key watersheds. Breakthrough of 1.14 will open upward space. If you fall below 1.13, you may further fall to 1.1206. In terms of fundamentals, Germany's fiscal expansion and safe-haven demand will continue to provide support for German debt, so the euro is resilient. Tariff rhetoric and uncertainty in the situation in Russia and Ukraine may intermittently push up German bond demand, and the euro may remain strong in the short term due to capital inflows. However, if US economic data (such as non-agricultural) exceeds expectations, the US dollar may rebound, and the interest rate spread between German bonds and US bonds will determine the euro's trend. Traders need to pay close attention to whether German bond yields have exceeded 2.8%, and whether the euro has stood firm at 1.14. As the benchmark asset of the euro zone, German bonds play a key role in the euro trend in the current market. On April 28, the 10-year yield of German bonds rose slightly to 2.50%. Driven by Germany's fiscal expansion and global safe-haven demand, the euro maintained a 1.13-1.14 volatility against the US dollar. From the fundamental perspective, the increase in German lending, expectations of ECB interest rate cuts and external funding support provide support for German bonds and the euro; from the technical perspective, the euro is consolidated near the 200-day moving average, and the breakthrough of German bond yields will determine its direction. In the next week, the trend of German bond yields and the performance of euro zone data will be the focus of the market, and traders need to remain vigilant and capture potential breakthrough signals.
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