EURUSD Bounces From Parity As Dollar Loses CPI-Inspired Momentum
The EUR/USD bounced from below parity once again on Wednesday and posts a modest daily gain in the 1.0050 area as the dollar failed to retain the data-triggered strength.
The greenback rallied across the board after data showed the US Consumer Price Index rose by 9.1% in June, recording the highest inflation rate in forty years. Core inflation showed a slight deceleration as the YoY reading came at 5.9% from May’s 6% but above expectations of 5.7%. The knee-jerk reaction pushed the EUR/USD to a fresh 20-year low of 0.9997.
However, the dollar made a U-turn – alongside US Treasury yields and Wall Street indexes – as, despite the hotter-than-expected inflation figures, investors remain hesitant on whether the Fed would dare to raise rates by 100 basis points. WIRP suggests tightening expectations increased as swaps markets are now pricing a 41.6% probability of a 100 bps hike for the next FOMC meeting.
From a technical perspective, the EUR/USD retains a bearish short-term bias according to the daily chart, with the price making lower lows. However, reiterated rejection from the 1.0000 level and oversold conditions could lead to a corrective movement.
On the upside, a recovery above the 1.0100-20 area could ease the immediate pressure, allowing a move towards 1.0200. A break above could pave the way to the 20-day SMA, currently at 1.0375.
On the other hand, a decisive break below 1.0000 would expose the 0.9960 area. Loss of the latter would put the EUR/USD pair in uncharted territory.
The greenback rallied across the board after data showed the US Consumer Price Index rose by 9.1% in June, recording the highest inflation rate in forty years. Core inflation showed a slight deceleration as the YoY reading came at 5.9% from May’s 6% but above expectations of 5.7%. The knee-jerk reaction pushed the EUR/USD to a fresh 20-year low of 0.9997.
However, the dollar made a U-turn – alongside US Treasury yields and Wall Street indexes – as, despite the hotter-than-expected inflation figures, investors remain hesitant on whether the Fed would dare to raise rates by 100 basis points. WIRP suggests tightening expectations increased as swaps markets are now pricing a 41.6% probability of a 100 bps hike for the next FOMC meeting.
From a technical perspective, the EUR/USD retains a bearish short-term bias according to the daily chart, with the price making lower lows. However, reiterated rejection from the 1.0000 level and oversold conditions could lead to a corrective movement.
On the upside, a recovery above the 1.0100-20 area could ease the immediate pressure, allowing a move towards 1.0200. A break above could pave the way to the 20-day SMA, currently at 1.0375.
On the other hand, a decisive break below 1.0000 would expose the 0.9960 area. Loss of the latter would put the EUR/USD pair in uncharted territory.