EUR/USD Intermarket: Supported by EUR/GBP rally

The four-day winning streak in EUR/USD from the low of 1.1123 (Sep 21 low) contradicts the slide in the German yields and more importantly resurgence of banking sector concerns in Europe.

The common currency has remained remarkably resilient amid Deutsche Bank mess, but that is about to end since the EUR/GBP pair is now on the retreat.

Cable supported by EUR/GBP

UK’s month end subsidy payment to EU saw an increased demand for EUR/GBP. No wonder GBP/USD pair dropped while EUR/USD remained resilient despite Deutsche Bank crisis. Also note, the two-year German Bund yield hit a record low of -0.717%, which further adds credence to the view that strength in EUR was mainly due to rise in EUR/GBP.

The subsidy payment effect appears to have been priced-in, which is evident from the pull back in the EUR/GB pair from the high of 0.8716 to 0.8620. This also means the EUR/USD pair could now respond more to the negative news flow out of Eurozone.