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  • EUR/USD staged a decisive rebound after dropping toward 1.1700 on Wednesday.
  • Risk-on market environment helped the shared currency gather strength.
  • US Dollar Index looks to snap three-day winning streak.

The EUR/USD pair dropped to its lowest level in more than a week at 1.1711 during the early European session on Wednesday but didn’t have a difficult time reversing its direction. After climbing to a daily high of 1.1917 during the American trading hours, the pair has gone into a consolidation phase and was last seen gaining 0.42% on a daily basis at 1.1788.

Risk rally lifts EUR

Earlier in the day, the data published by the Eurostat showed that Industrial Production in the euro area expanded by 9.1% on a monthly basis in June. Although this reading came in slightly worse than the market expectation of 10%, the shared currency capitalized on risk flows and gathered strength against its peers.

Moreover, German’s 30-year government bond yield turned positive on the day and the 10-year yield advanced to its highest level in nearly a month to provide an additional boost to the EUR.

In the second half of the day, Wall Street’s main indexes started the day in the positive territory and caused the greenback to continue to lose interest as a safe-haven. The US Dollar Index, which rose to 93.91 on Wednesday, erased its gains and now remains on track to snap its three-day winning streak, losing 0.25% on the day at 93.41.

Wednesday’s data from the US revealed that the core Consumer Price Index (CPI) rose to 1.6% on a yearly basis in July from 1.2% and surpassed analysts’ estimate of 1.1%. 

On Thursday, the inflation report from Germany will be featured in the European economic docket. Later in the day, the US Department of Labor’s weekly Initial Jobless Claims data will be watched closely by the market participants.

Technical levels to watch for