EUR/USD struggles for direction, sidelined around mid-1.1600s

• A subdued USD price action assisted EUR/USD to gain some intraday traction on Monday.
• Elevated US bond yields helped limit the USD losses and capped the upside for the major.
• Bulls remained on the sidelines following the release of mixed German IFO survey results.

The EUR/USD pair struggled to capitalize on its modest intraday gains and was last seen hovering around mid-1.1600s, nearly unchanged for the day.

The pair gained some positive traction on the first day of a new week, albeit struggled to capitalize on the move and remained well within a four-day-old trading range. The dominant risk-on mood in the markets weighed on the safe-haven US dollar and extended some support to the EUR/USD pair through the first half of the European session.

However, a combination of factors held bulls from placing aggressive bets and capped the upside just ahead of the 1.1665-70 resistance zone, or monthly tops touched last week. Elevated US Treasury bond yields acted as a tailwind for the greenback and turned out to be a key factor that kept a lid on any meaningful gains for the major.

In fact, the yield on the benchmark 10-year US government bond held steady near the 1.65% mark amid growing acceptance for an early policy tightening by the Fed. Apart from this, the disappointing release of the German IFO survey results failed to impress bullish traders or provide any meaningful impetus to the EUR/USD pair.

The headline German IFO Business Climate Index dropped to 97.7 in October as against consensus estimates for a fall to 97.9 from 98.9 recorded in the previous month. Additional details revealed that the Current Economic Assessment edged lower to 100.1 from 100.4, while the IFO Expectations Index fell to 95.4 from 97.4 in September.

Moving ahead, there isn't any major market-moving economic data due for release from the US. Hence, the US bond yields, along with the broader market risk sentiment will influence the USD price dynamics and provide some impetus to the EUR/USD pair. That said, the momentum is likely to be limited ahead of the European Central Bank meeting on Thursday.

Technical levels to watch