Elections may be influencing EUR/USD more than US pricing
June 28 (Reuters) -EUR/USD turned lower Friday after spiking to 1.0720 even as U.S. yields US2YT=RR, US10YT=RR turned lower after U.S. May PCE data, suggesting investors may be more concerned about election uncertainty in France.
Investors priced in a higher probability the Fed cuts in September to 68% from 64% ahead of PCE data.
The U.S. yield drop helped erode some of the dollar's yield advantage over the euro. German-U.S. 2-year spreads US2DE2=RR traded to their tightest in two weeks, but EUR/USD was unable to rally.
The latest polls for French elections indicate the National Rally (RN) party extended its lead.
The poll contributed to the German-French yield spreads DE10FR10=RR striking 12-year wides.
EUR/USD investors appear to be playing it safe by shunning the euro for now.
The pair's price action has reinforced bearish technical signals. It remains below the 10-day moving average; consolidation of the drop from the June 4 high persists while falling daily and monthly RSIs imply downward momentum remains.
May and April monthly lows are immediate supports. Should they break, stop selling may result which could lead to a test of 1.0450/1.0500.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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