EUR/USD strengthens despite drop in German yields to one-month lows

The EUR/USD is on the front foot this Wednesday morning in Asia at 1.0680 after having recovered from the low of 1.0635 in the North American session.

The positive action contradicts the drop in the German yields and the rise in the US stocks.

French election jitters weigh over German yields

Germany's benchmark borrowing costs fell to the lowest level in more than a month as the investors reinstated hedges on concerns over the resilience of far-right candidate Marine Le Pen in France's upcoming Presidential elections.

Polls show, the anti-EU candidate Le Pen, who has promised a referendum, is set to be crushed by Emmanuel Macron. However, polls have proven to be unreliable in the run up to Brexit referendum and US elections.

Hence, markets are once again pouring money into regional safe havens like the German Bunds. The 10-year Bund yield dropped to 0.24% on Tuesday, the lowest level since February 28. Meanwhile, the two-year Franco-German yield spread rose to the highest level since 2012.

It remains to be seen if the EUR continues to ignore the drop in the German yields today. The focus would also be on the US ADP, ISM non-manufacturing and Fed minutes release.

EUR/USD Technical Levels

The spot was last seen trading around 1.0680. A breakdown of support at 1.0668 (session low) would open doors for a revisit to 1.0635 (previous day’s low) and 1.06 (zero figure). On the higher side, breach of hurdle at 1.07 (zero figure) would open up upside towards 1.0782 (Mar 17 high) and 1.08 (zero figure).