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Apr 12 - 10:55 PM

EUR/USD - COMMENT-EUR/USD Breakout Likely In Reaction To U.S. CPI

By John Noonan  —  Apr 12 - 08:57 PM

The EUR/USD has consolidated between 1.1860 and 1.1930 for the past four trading days, as the market looks for a fresh catalyst to ignite a trend.
The reaction to U.S.
consumer price data due later Tuesday should determine the euro's short-term direction
nL1N2M52E6.

The EUR/USD has risen close to 2.0% since bottoming at 1.1704 on March 31, as longer-dated U.S. Treasury yields have remained contained despite relatively strong economic datanL1N2LV0IB.

The 10-year Treasury yield topped out at 1.77% on March 30 and has consolidated between 1.61% and 1.68% for the last four trading days.
If the March CPI comes in hotter than expected, as was the case with last week's PPI release nL1N2M213Q, it will heighten inflation fears and undermine attempts by Federal Reserve officials to calm those concerns nL1N2M12J5.

If the 10-year yield rises above 1.70% and starts tracking higher it will likely underpin the dollar - the currency would receive an added boost from a negative equity market reaction to heightened inflation concerns/higher U.S. yields.

A EUR/USD break below 21-day moving average support at 1.1847 would signal a short-term top is in place and open the way for another test of 1.1700.

However, if the bond market reacts calmly to the U.S. CPI, it will encourage EUR/USD bulls to push the pair above the upper end of the recent range and initially target daily tops around 1.1990.

For more click on FXBUZ


Source:
Refinitiv IFR Research/Market Commentary

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