EUR/USD grinds to session low after the European Commission slashes growth forecasts

Technical Analysis

Author: Justin Low | eurusd

The euro is catching up to the kiwi as the worst performing major currency today

EUR/USD H1 07-02
The single currency slips to its lowest levels on the day against the dollar as the greenback pushes higher alongside some mild weakness in the euro following the European Commission's release of its latest growth forecasts. The low today for EUR/USD touches 1.1332.

We're now at a key area with support from the 3 January low @ 1.1338 also called upon and a dip below that will only see support close to 1.1300 as the next line of defense for buyers. The move lower here comes in conjunction with some negative pricing seen in European assets.

Often seen as an indication for rate hike expectations, the EUR 5Y inflation swap forward just fell to its weakest level since November 2016. That indicates that the market's long-term view of inflation expectations are dwindling and that doesn't bode well for any ECB rate hike pricing.

EUR 5y swap
At the same time, we're also seeing the yields spread between Italy and Germany 10-year bonds widen to its highest level in almost two months, at 282 bps currently:

Italy Germany yields spread

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