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Aug 12 - 05:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Unable To Test 2021 Lows, As High PPI Impact Limited

By Randolph Donney  —  Aug 12 - 02:15 PM

The dollar was unable to capitalize much on another sizzling PPI increase nW1N2PJ02X, because the news didn't lift Fed rate hike pricing.
Indeed, even though the 1.0% m/m core rate was double expectations, and the 5th month in a row higher than forecast, the USD only edged up.
The PPI also triggered a brief risk-off response from stocks amid concerns businesses' profits could be hurt if the rising input and labor costs couldn't be passed along to consumers.

All-in-all, the dollar was little changed versus the euro and yen due to limited reaction from Treasuries, though sterling bears again showed their claws after decent UK GDP was overshadowed by bearish trade balance and industrial production results.

Dollar and Treasury yield gains after the PPI and claims nL1N2PI23V releases weren't durable enough to threaten a break of EUR/USD's 2021 low nearly reached Wednesday, before slightly softer-than-forecast U.S. CPI weakened the dollar.

EUR/USD is about flat and in a tight 1.1724-48 range on EBS, inside Wednesday's 1.1706-55 action that brushed March and 2021's 1.1704 EBS low by the 38.2% Fibo of the 2020-21 pandemic recovery at 1.16945.

Wednesday's high is by the 23.6% Fibo of the July 30 to August 11 slide, with bigger hurdles by the 50% Fibo at 1.18075, given this market's affinity for using big figures as support and resistance.

The next major macro event is Tuesday's U.S. retail sales report, but the broader foci is on the August 26-28 Jackson Hole Symposium, hopefully for more well-defined Fed policy normalization plans, as well as on the current Delta-led wave of the pandemic.
The market will also be keeping tabs on the $3.5 trln budget plan wending its way through Congress.

Sterling fell 0.4% after a failed attempt to clear the falling 10-day moving average and is approaching Wednesday's 1.3804 August low.
Next support is at the 50% Fibo of the late July rally at 1.3778, and the 200-DMA there on Friday.

USD/JPY gave up initial gains on the high PPI, and is about unchanged, and so far well supported by Wednesday's 110.315 EBS low at the 23.6% Fibo of the speedy 1.9% rally from the Aug 4, pre-payrolls report low.

Limited Treasury yield gains on the PPI report and broader demand for the haven yen have yielded a tiny 110.32-54 range.
It appears a USD/JPY topside breakout toward 2021's 111.66 peak is on hold unless EUR/USD signals fresh, major dollar gains by breaking this year's lows nL1N2PJ1BV.

Aussie fell 0.42% as lockdowns and slowing China growth concerns linger, and the recent rebound in Treasury yields saps demand for many high-beta but low-yield currencies.

Bitcoin slid after failing for a fourth consecutive session to clear its 50% Fibo of the April-June dive, dragging ether down with it, though from a higher relative starting position.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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