The EUR/USD pair trimmed some of its early strong gains to 3-year tops but has still managed to hold its neck above the 1.2100 handle.
The pair touched an intraday high near mid-1.2100 but quickly retreated around 35-40 pips following the release of slightly better-than-expected US core CPI print, which provided a minor boost to the US Dollar.
Looking at the market reaction to the core inflation figures, with 2-year yield hitting 2% for the first time since Sept. 2008, clearly suggests that investors now seemed convinced that the Fed would eventually move towards raising interest rates in March.
Meanwhile, the latest German political development, followed by yesterday's hawkish ECB monetary policy meeting minutes continue to underpin the shared currency and helped limit any deeper corrective slide.
With the key US macro data out of the way, a follow-through up-move, led by additional short-covering on the last trading day of the week, now looks a distinct possibility.
Technical levels to watch
Bulls might continue to target the 1.2165 immediate resistance, above which the bullish momentum could further get extended towards reclaiming the 1.2200 handle.
On the flip side, the 1.2100 handle now becomes an immediate strong support to defend, which is followed by a strong horizontal support near the 1.2070-65 region.
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