EUR/USD bid above 1.18 as US 10-year yield drops

• EUR/USD has cleared hurdle at 1.18 alongside a decline in US yields. 
• The US 10-year yield has retreated from five-week highs. 
• A fiscal impasse in Washington is likely weighing over yields and the dollar. 

EUR/USD is trading in the green above 1.18 on Thursday with the dollar losing smile seemingly due to weakness in treasury yields. 

Yields pullback from 5-week highs

The US 10-year yield is hovering at 0.65% at press time, down nearly five basis points from Wednesday's five-week high of 0.698%. 

The pullback could be associated with the fiscal impasse in Washington, where Democrats and Republicans are struggling to approve an additional stimulus package. Experts are of the opinion that additional stimulus is needed to counter the negative impact of the recent resurgence of the coronavirus. As such, the delay is weighing over yields and the US dollar. 

The pair will likely continue to grind higher during the European session if the yields remain under pressure.

On the data front, the focus would be on the US jobless claims, scheduled for release at 12:30 GMT. The German CPI data for July due at 06:00 GMT will likely be a non-event unless it carries a significant upward or downward revision to the preliminary number released two weeks ago. 

At press time, EUR/USD is trading near 1.1810, representing a 0.22% gain on the day. 

The 10-year yield jumped to five-week highs on Wednesday on the back of upbeat US CPI data. The cost of living in the US ticked higher in July with the consumer price index rising 0.6% month-on-month, the official data showed. Economists polled by Reuters had forecast the CPI rising 0.3% in July. 

Technical levels