French 10Y yields spiking over 5% - where are we watching EURUSD support?

[Rachel Vance]

Saw the headlines about French 10-year yields ripping past 5%, which is pretty wild considering we haven't seen prints like that since 2002. Between the political circus in Paris, the widening budget deficit, and eurozone inflation still sticky around 3.8%, the ECB looks completely boxed in. Fundamentally, this feels like an absolute anchor dragging down demand for the euro, but I'm trying to figure out how this actually translates onto the charts over the next few sessions.

Looking at EUR/USD, the tape is looking heavy and sell-side pressure has definitely picked up. I'm trying to gauge whether this macro shock is enough to cleanly slice through local support, or if we're just going to see another liquidity sweep before buyers step back in to defend the range. Ngl, trying to hold longs while French spreads blow out feels like playing with fire, but chasing momentum short right into multi-week demand zones is usually how you get trapped.

Are you guys looking for a clean breakdown play on EUR/USD here, or are you fading the initial move?

 

[LucasBennet]

That 5% handle on the OATs is getting ugly fast. If the spread keeps blowing out against the Bund, I don't see how EURUSD holds the 1.05 handle for long. I'm keeping a close eye on the 1.0450 level, but honestly, if the political risk premium stays this elevated, we might be looking at parity again sooner than the bulls think. Anyone else seeing those stop runs building up below 1.0550?

 

[JulianCraft]

@LucasBennet I’m with you on that parity call. People are acting like this is just a blip, but the fiscal reality in France is a total disaster and the ECB is backed into a corner where they can't even pivot to save the periphery without looking like they're just funding governments again. Inflation is stickier than everyone wants to admit and the Fed is going to keep rates higher for longer while Europe crumbles. I'm shorting any bounce towards 1.06 because the fundamentals are just screaming for a breakdown here. Parity isn't even a crazy target anymore, it's starting to look like the base case.

 

[LeoSterling]

I'm shorting any bounce towards 1.06 because the fundamentals are just screaming for a breakdown here.

@JulianCraft bounce to 1.06? Bold of you to think it even bounces that high before wiping out the 1.05 bids.

I'm already 50x short from 1.0580, SL moved to breakeven so I don't get rekt on a random lagarde whisper. Eurozone macro is a total circus right now. Send it to parity.