The US Dollar took a sharp knock on Thursday and helped the EUR/USD pair to build on this week's strong rebound from the 1.1530-25 support area. Against the backdrop of diminishing risk of any further escalation in trade tensions, the greenback was further hit by a lower-than-expected consumer inflation figures. The data changed views on an acceleration in domestic inflation and forced investors to scale back faster Fed rate hike expectations, which eventually weighed heavily on the buck.
The shared currency got an additional boost after the European Central Bank (ECB) signalled it was on track to dial back its bond purchases later this year, though reaffirmed that the monetary policy will remain accommodative even after the end of asset purchase program. Meanwhile, the central bank kept its inflation forecasts unchanged but lowered growth projections slightly.
The pair rallied to the 1.1700 handle or two-week tops and now seems to have entered a bullish consolidation phase, oscillating in a narrow trading band through the Asian session on Friday. Today's Euro-zone economic docket lacks any major market-moving data releases and hence, the key focus will remain on the release of US monthly retail sales, expected to post another solid month of growth in August. Any major divergence from the expected figures should influence the USD price dynamics and provide some meaningful trading opportunities on the last trading day of the week.
From a technical perspective, yesterday's up-move confirmed a near-term bullish break through a two-week-old trading range and support prospects for an extension of the ongoing positive momentum. Short-term technical indicators have already started gaining positive momentum and thus, add credence to the constructive outlook. Hence, any follow-through buying interest has the potential to lift the pair even beyond August monthly swing high level of 1.1734, towards its next major hurdle near the 1.1790-1.1800 region.
On the flip side, any meaningful profit-taking slide is likely to find some fresh buying near the trading range resistance break-point, around the 1.1660-50 region. A subsequent fall might now be limited by another resistance turned support, near the 1.1600 handle.
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