EUR/USD heads back towards 1.1800 on Eurozone CPI, Draghi eyed

  • In-line with estimates Eurozone final CPI fails to impress.
  • US dollar hangs near 5-month tops, keeping bearish bias intact in EUR/USD.
  • Will Draghi’s speech save the day for the EUR bulls?

The EUR/USD pair failed to benefit from the release of the Eurozone final CPI figures, which came in line with estimates, leaving doors open for a test of fresh five-month lows reached at 1.1816 in early Asia. The Eurozone final CPI arrived at +1.2% y/y vs +1.2% prelim in April.

The bearish bias remains intact around the common currency on the back of narrowing Italian and German yield differential, as markets expect a government deal to be reached between Five Star and League later today.

Five Star Spokesperson: Government deal with League to be reached today - RAI

From a broader perspective, the spot risks further downside, as monetary policy divergence between the Fed and ECB continues to remain in play, with the US dollar ruling the roost amid the latest upsurge Treasury yields.

Next of note for the major remains the ECB President Draghi’s speech for fresh trading impetus while the US data flow will also have a significant impact on the US dollar trades going forward.

EUR/USD Technical Levels

Slobodan Drvenica, Information & Analysis Manager at Windsor Brokers, notes, “Firm break below 1.18 handle would open 1.1717 (12 Dec trough) and more significant supports at 1.1709 (Fibo 38.2% of 1.0340/1.2555 ascend) and 1.1675 (weekly cloud top).
Bearish techs support the notion as converging 20 and 200SMA’s are about to form bear-cross and reinforce negative stance. The base of thick 4-hr cloud at 1.1884 and falling 10SMA at 1.1904 mark solid barriers which should cap stronger upticks. Res: 1.1858; 1.1884; 1.1904; 1.1938 Sup: 1.1815; 1.1776; 1.1717; 1.1709.” 

 

 

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