EUR/USD firmer and closer to the 1.18 mark

The selling bias in the greenback is helping EUR/USD to challenge 3-day highs in the vicinity of 1.18 the figure on Wednesday.

EUR/USD stronger post-US CPI

EUR/USD is accelerating the bounce off the vicinity of 1.1700 and is now around a cent higher, flirting at the same time with multi-day highs.

The pair extends the rebound always in response to the continuation of the downside in the dollar, which trades in daily lows when gauged by the US Dollar Index (DXY).

The prevailing risk-on sentiment continues to favour the leg higher in the pair, also sustained by yields of the US 10-year note trading in new 5-week highs following the US CPI results.

In fact, US inflation tracked by the CPI surpassed estimates in July, rising 0.6% MoM and 1.0% from a year earlier. In the same line, the Core CPI gained 0.6% inter-month and 1.6% over the last twelve months.

Earlier in the euro area, Industrial Production in the bloc extended the rebound and expanded more than 9% during June.

What to look for around EUR

EUR/USD pushed higher and recorded new highs near 1.1920 in the second half of last week, triggering a corrective move to the 1.17 zone so far. The July-August rally, while largely triggered by broad-based dollar-selling and improved sentiment in the risk-associated universe, found extra sustain in auspicious results from domestic fundamentals, which have been in turn supporting further the view of a strong economic recovery in the wake of the coronavirus fallout. Also lending wings to the momentum around the euro appear the recently clinched deal on the European Recovery Fund – which helped putting political fears within the bloc to rest (for now) – and the solid position of the current account in the region.

EUR/USD levels to watch

At the moment, the pair is gaining 0.42% at 1.1789 and a breakout of 1.1916 (2020 high Aug.6) would target 1.1996 (high May 14 2018) en route to 1.2032 (23.6% Fibo of the 2017-2018 rally). On the other hand, the next support is located at 1.1695 (monthly low Aug.3) followed by 1.1495 (monthly high Mar.9) and finally 1.1448 (50% Fibo of the 2017-2018 rally).