- EUR/USD made a sharp U-turn and turned in the second half of the day.
- US Dollar Index holds on to modest gains above 90.50.
- Euro economy contracted by 0.6% in the fourth quarter.
The EUR/USD pair closed the first day of the week little changed and gained traction during the European trading hours on Tuesday. After touching its highest level in three weeks at 1.2170, however, the pair reversed its course and turned negative on the day. As of writing, the pair was down 0.15% on the day at 1.2107.
Earlier in the day, the data published by the Eurostat showed that the euro area economy in the fourth quarter contracted by 0.6% on a quarterly basis. This reading came in better than the market expectation and the preliminary estimate for a decline of 0.7%. Meanwhile, the ZEW Survey – Economic Sentiment Index in Germany improved to 71.2 in February from 61.8 in January and beat analysts’ estimate of 59.5.
Commenting on the ZEW survey, “financial market experts are optimistic about the future; they are confident that the German economy will be back on the growth track within the next six months,” said ZEW President Professor Achim Wambach.
DXY jumps above 90.50 on rising US T-bond yields
Nevertheless, investors largely ignored this data and the USD’s market valuation continued to impact EUR/USD’s movements.
During the first half of the day, the greenback stayed under heavy bearish pressure as risk flows continued to dominate financial markets. The US Dollar Index (DXY) dropped to its lowest level since January 21 at 90.11 but staged an impressive rebound in the early American session.
Supported by the sharp upsurge witnessed in the US Treasury bond yields, the DXY advanced to a daily high of 90.64. Currently, the 10-year US T-bond yield is up nearly 6% and the DXY remains on track to end the day modestly higher above 90.50.
Technical levels to watch for
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