Will EUR/USD cheer risk-off or revisit weekly lows?

EUR/USD was offered above the 5-DMA in Asia and was last seen trading just below 1.06 handle. The weakness is largely driven by the losses in the EUR/JPY cross.

The heightened geopolitical risks and increasing evidence of the unwinding of Trump trade could keep the risk-off tone intact. The traditional safe havens like - Gold and funding currencies like JPY are likely to stay well bid.

The question is whether the EUR strengthen amid risk-off. The common currency has behaved like a funding currency ever since the ECB pushed rates to negative territory and started the QE program.

However, the risk-off tone may not push EUR higher today, given the uncertainty surrounding French elections. The EUR/USD pair is likely to track the Bund-OAT spread during the day ahead. The weekly lows could be put to test if the spread between French bond yields (OATs) and German bond yields widen.

EUR/USD Technical Levels

A break below 1.0569 (Apr 10 low) would open doors for a sell-off to 1.0525 (Mar 9 low) and 1.05 levels (psychological support). Also take note of the fact that a daily close below 1.06 would mark the breach of the rising trend line drawn from Jan low and Mar low.

On the higher side, a break above 1.0625 (100-DMA) would open up upside towards 1.0657 (50-DMA) and 1.0689 (Apr 5 high).