The spread between the German and US 10-year bond yield seems to have carved out a sideways channel this year. As of now, the channel resistance is seen at 244 basis points.
A break higher would imply resumption of the rise from November lows of 280 basis points. Tighter German-US yield differentials would be positive for EUR/USD.
So, I would look to buy...
I expect both US10Y and DE10Y continue to rise.
But, the spread between the two countries may find resistance around 1.618 projection.
Under that scenario, I suspect EURUSD has bottomed at 1.1300 and could target 50% retracement of September 2018 high to Oct 2018 low at 1.1558.
This is loooong term chart here, but the process in motion is a really dangerous one because it concerns the bond market that is supporting every bit of the investment process and credit liability throughout the market. This spread between german and US yielding is reaching long term dangerous levels of distortion and may lead to some credit troubles.
I have been taking a look at the chart for US10y-German10y yield spreads and what that might mean for various markets. Currently at the widest spread since the start of 2000 so at important resistance. Also looks like it it running out of steam with MACD divergence and about to roll over. Could see a fall in spread from 2.55-2.60% of at least 20-30bps if chart...
if we see the eurusd through the difference in bonds yield (us10y-de10y) then we see a sharp steep rally in eurusd.
moreover, according to Gann fan(as i roughly understand it) , we may expect a sharp reversal thereafter.
it doesn't look that this rally in eur will last long ..akka short lived.