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EUR/USD: Eyes on yield-differential ahead of EZ CPI and US core PCE

  • DXY weaker on Fed’s caution on rapid rate rises.
  • Looking to regain 1.1900 levels.
  • Eurozone flash CPI and US core PCE figures hold the key.

The EUR/USD pair broke its overnight consolidative mode in the Asian trades and went on to post session tops at 1.1871 levels amid renewed weakness seen in the US dollar across the board, as attention now turns towards the inflation figures from both continents for the next direction.   

EUR/USD: Upbeat German Prelim CPI supports

The bid around the EUR keeps growing bigger over the last hours, sending the main currency pair back towards 1.19 handle. The move higher is mainly driven by resurgent US dollar supply, as the bulls remain unimpressed by the recent rally in Treasury yields across the board.

Treasury yields witnessed a sharp rally on Wednesday, after the US Q3 GDP figures bettered estimates, while the Fed’s Beige book revealed that the price pressures have strengthened since the last report.  The US dollar index drops -0.15% to test 93 handle.

Moreover, Wednesday’s upbeat German Prelim CPI report also continues to underpin the sentiment around the Euro.

However, further gains remain conditional on the US-German yield differential ahead of the Eurozone flash CPI report and US core PCE price index. The US-German 10-year yield differential now remains in favor of the USD, which could limit the renewed upside in the major.

Also, of note for the pair remains the German retail sales, US jobless claims data and Fedspeaks due on the cards later today.

EUR/USD Technical Levels

According to Valeria Bednarik, Chief Analyst at FXStreet, “Shorter term, and according to the 4 hours chart, the pair seems to have comfortably stabilized above the 1.1800 figure, as the 20 SMA remains flat above the current level, while technical indicators head nowhere, anyway within negative territory. US data will have more weight than European one this Thursday, with upbeat inflation in the world's largest economy favoring a bearish extension, moreover on a break below the 1.1820 support. Support levels: 1.1820 1.1785 1.1750. Resistance levels: 1.1890 1.1925 1.1960.”


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