EUR/USD drops as dollar suddenly surges

The EURUSD pair was down 0.6% at the last check, and it was trading below the 1.21 level on Friday afternoon.

Earlier in the session, the Michigan consumer sentiment index improved further to 86.4 in June, up from 82.9 previously.

However, a deeper analysis of consumer behavior is not that positive. As the chief economist, Richard Curtin said that since "Rising inflation remained a top concern of consumers", the spontaneous references to market prices for homes, vehicles, and household durables fell to their worst level since the all-time record in November 1974. 

And as Curtin adds, "these unfavorable perceptions of market prices reduced overall buying attitudes for vehicles and homes to their lowest point since 1982.

Data released on Thursday saw the US consumer price index (CPI) jumping 5.0% year-on-year in May, the sharpest rise in more than a dozen years, up 0.6% on the month. 

In addition, the core CPI, which excludes volatile food and energy prices, increased 3.8% year-on-year, the biggest rise in three decades, and 0.7% month-on-month in May.

What was interesting is the fact that the 10-year yield plummeted and broke down from its multi-month consolidation phase, suggesting the uptrend in yields might be over. 

The next support for the 10-year yield is seen at 1.39%, with the key level to watch and the long-term trend line at around 1.3%.

If the 1.21 area gets broken down, stop-losses of long positions will be hit, potentially sending the euro toward 1.2050. Alternatively, the resistance seems to in the 1.2150 region.