EUR/USD slipped below the 200-DMA on Friday due to broad based dollar buying driven by a sharp bounce in U.S. Treasury yields US10YT=RR and a fall in eurodollar prices EDZ2 but bulls might still achieve their goal of testing the 1.2000/50 area.
Above-estimate jumps in March U.S. PPI data buoyed the U.S. interest rate complex, leaving investors to wonder about the Fed tightening sooner than previously thought.
Price action in yields and EUR/USD suggest investors are discounting the PPI data a bit.
The 10-year yield has given back most of it's post-PPI lift while EUR/USD's post-data drop stalled short of key support near 1.1860.
EUR/USD's hold above that support suggests it will continue to consolidate gains from the March 31 low, which is a bullish technical signal.
The consolidation should resolve with EUR/USD making new highs.
Should investors look past the PPI, the 10-year yield's fall from the March 30 peak might resume.
A test of key support in the 1.5850%/1.590% zone is then likely.
Should yields sink toward that support the dollar selling is likely and EUR/USD should rally to 1.2000/50.
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