EUR/USD is trading higher today nL1N2FR0NL, likely on the back of equity and oil price gains, as well as EUR/JPY's rally above 126.00.
That said, bulls should tread cautiously as U.S. inflation expectations and interest rates could foil their plans.
The bull trend for the U.S. 5-year/5-year inflation linked swap USIL5YF5Y=R has resumed after last week's high was pierced on Monday and the bull pennant top was broken in early August.
The rally now looks set to test both the March high and the 2020 high.
Suddenly buoyant U.S. interest rates are another concern for EUR/USD longs.
The 10-year Treasury yield US10YT=RR broke out from a bull pennant and is nearing 0.71%, while August 2021 fed funds futures prices FFQ1 are threatening to break below key support.
This price action is suggesting U.S. rates are set to rally, which should support the dollar.
Should Fed Chairman Powell's Jackson Hole speech on Thursday not rein in rates, dollar buyers could take control.
EUR/USD might then break below key 1.1710/1.1695 support and trigger stops likely sitting just beneath this area.
EUR/USD bears would then likely gain more confidence and drive the pair toward the 1.1630/1.1570 and 1.1510/1.1490 support zones.
For more click on FXBUZ