The euro has managed to bounce off key support around 1.1700 for the second time in four months, but it is premature to declare a bottom is in place as the prospect of the U.S. Federal Reserve tightening policy should underpin the dollar at least in the short term.
The U.S. dollar and Treasury yields eased after the core consumer price reading for July came in slightly lower than expected nL1N2PG1LK.
The EUR/USD recovered from its pre-CPI low at 1.1706 to close 0.15% higher around 1.1740.
The so-called "dead-cat bounce" does not suggest a bottom is in place, at this stage anyway nL1N2PI1K2.
The CPI report is not a game-changer for the Federal Reserve and should not upset the timetable for the tapering of their bond buying program. More is likely to be revealed at the Jackson Hole Symposium in late August, but the market has started to price in the Fed announcing tapering at their September meeting and for it to commence before year-end nL1N2PI253.
EUR/USD has key Fibonacci support at the 38.2 retracement of the entire 1.0636-1.2349 move at 1.1694.
A break below 1.1690 initially targets the 1.1602 trend low made in November 2020.
Only a break above 1.1800, where the 10 and 21-day moving averages converge, would suggest a bottom is in place.
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