EUR/USD rebounds to test 1.2250 on notable USD supply

• DXY offered in Europe.

• Rebound in German yields underpins.
• Eyes German Buba report for fresh impetus.

Fresh bids emerged once again near 1.2215 region, prompting a tepid bounce in the EUR/USD pair back towards the midpoint of the 1.22 handle, as broad-based US dollar selling resumes amid narrowing US-German yields spread.

The European traders hit their desks and reacted negatively to the US government shutdown news, triggering a fresh round of selling in the greenback across its main competitors.

Meanwhile, a fresh effort made by the German Social Democrats (SPD) on Sunday to finally end the political deadlock pushed the German 10-year yields higher, thereby narrowing the 10-year US-German yields differential, which turned out to supportive of the EUR.  

Also, expectations of a hawkish language in the ECB’s policy statement combined with mixed sentiment seen on the European equities keep the sentiment somewhat buoyed around the common currency.

Markets now look forward to the German Bundesbank’s monthly economic report due to be released at 11GMT for fresh trading impetus, as the economic calendar remains absolutely data-dry today.

EUR/USD Technical Levels

Jim Langlands at FX CHarts notes: “A neutral stance seems wise at the start of the week with the momentum indicators showing little change from Friday. The short-term momentum indicators are pointing a little lower, so a retest of 1.2200/1.2170 would not surprise, but with the dailies still looking positive, a return to the trend high should not be discounted either.”