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May 16 - 11:55 AM

EUR/USD - COMMENT-Stubborn US Inflation Factors Return To Haunt EUR/USD

By Christopher Romano  —  May 16 - 10:10 AM

EUR/USD turned lower Thursday after striking a fresh 2-month high as U.S. data indicated stubborn inflation may still influence the Fed to hold rates higher for longer, leaving the euro facing a growing risk of downward correction.

In the slew of U.S. data released Thursday, investors focused on April import prices, which increased by the most in two years -- at +0.9% versus the +0.3% forecast and the downwardly revised March result of +0.4%.

The price increases drove yields US2YT=RRUS10YT=RR upward, which helped increase the dollar's yield advantage over the euro as spreads US2DE2=RR widened after hitting their tightest since early April on Wednesday.

The data increased investors' doubts the Fed will be able to cut the 50bps expected in 2024.

EUR/USD erased nearly half of Wednesday's CPI and retail sales data induced gains, which allowed some short-term bearish tech signals to emerge.

Daily RSI diverged on the new high and a daily inverted hammer candle formed.
Both signals suggest the possibility for a correction in EUR/USD's rally off April's low is growing.

Monthly technical signals still lean bullish, however, which may give longer-term EUR/USD bulls some comfort.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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