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May 25 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Hits 4+ Month High Before Risk-Taking Pullback

By Randolph Donney  —  May 25 - 02:51 PM

The dollar lost ground to the euro but fought to a draw against sterling and the yen in a session dotted with second-tier data and comments from ECB and Fed policymakers geared toward preventing markets from anticipating policy shifts toward tightening.

The dollar received some help after USD/CNY climbed back above 6.4000, reportedly with some assistance nL2N2NC0G8, which prevented a wider sell-off, particularly versus high-beta currencies.

EUR/USD's 1.2266 high on EBS broke resistance at 1.2250 after Germany's Ifo index beat forecast nL5N2NC1RS and the early risk-on flows.
Risk acceptance improved early due to receding inflation fears and associated Fed and ECB tapering concerns, thus allowing Treasury and euro zone government debt yields to fall for a fourth consecutive session.

ECB policymaker Francois Villeroy de Galhau said the ECB is at least as accommodative and will be at least as patient as the Federal Reserve, noting that euro area inflation is well below other jurisdictions nP6N2EM00K.

EUR/USD was up 0.25%, unable to extend early gains despite disappointing U.S. new home sales nAPN06G9Z5 and consumer confidence nAQN047ODB.

Fed vice chair Richard Clarida said the Fed could deal with inflation if necessary without wrecking the recovery nL2N2NC1X3.
Federal Reserve Bank of Chicago President Charles Evans reiterated his support for the Fed's super-easy policy nL2N2NB2JR.

Further downward pressure on Treasury yields and the dollar came from a well-bid 2-year auction.

Sterling, down 0.05%, failed to retest May and February highs at 1.4233/40 after a slip in UK retail sales nL5N2NC2TN and ongoing Northern Ireland concerns nS8N2K601F.

EUR/GBP cleared the 30-day moving average resistance for the first time since plunging below it on May 10, reinforcing the recovery from May 12's 0.85615 low by the 61.8% Fibo of April's recovery from pandemic lows.

USD/JPY was flat in a 108.565-9.07 range, the top of which ran into resistance ahead of assorted daily and weekly short-term moving averages, as well as the up trendline from January that prices have traded wholly below for a third straight session.

Month-end rebalancing could support of USD/JPY, but falling Treasury yields versus basically steady JGB yields will not benefit the large numbers of spec longs nL2N2NC1PO.

Aussie was flat after pulling back with stocks and after USD/CNY reverted above key support at 6.4000.

Bitcoin and ether were modestly lower after both hit their highest in four days, trying to shake off recent losses.

Wednesday is bereft of major economic releases.
Thursday features weekly jobless claims and Q1 GDP and PCE revisions.
Friday's personal consumption data and final Michigan sentiment that will be closely watch before the long weekend and the following week's employment report.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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