EUR/USD goes into consolidation below 1.1950 following upsurge to 27-month tops

• EUR/USD remains on track to close fifth straight day in the positive territory.
• Broad-based USD weakness remains as the main market theme.
• Focus shifts to CPI data from the euro area.

The EUR/USD pair gathered bullish momentum in the early American session and surged to its highest level since May 2018 at 1.1966. Although profit-taking into the end of the European session caused the pair to retreat from its highs, EUR/USD was last seen gaining 0.55% on a daily basis at 1.1935.

The pair’s rally on Tuesday was fueled by the heavy selling pressure surrounding the greenback. Amid a lack of significant macroeconomic data releases and fundamental drivers, USD continued to react to US Treasury bond yields’ movements. With the 10-year US T-bond yield extending its slide and losing more than 4% on the day, the US Dollar Index looks to post its lowest daily close in more than two years near 92.30.

On Wednesday, the Eurostat will release the inflation report for the euro area. Markets expect the core Consumer Price Index (CPI), which excludes volatile food and energy prices, to remain unchanged at 1.2% on a yearly basis.

EUR/USD outlook

Commenting on EUR/USD’s relentless rally, “we believe the risk-reward balance has shifted notably and we have therefore shifted our short-term bias from bullish to bearish. This is not to take away from our long-held bullish view for EUR/USD,” said analysts at MUFG Bank. “While we see reason over the medium term for the USD to weaken further, the 10% gain in EUR/USD in the last 3 months suggests elevated risks of some correction lower over the short-term.”

Technical levels to watch for