EUR/USD rebounds toward 1.14 amid broad-based USD weakness

  • US Dollar Index reverses course in the NA session, turns negative on the day.
  • Consumer confidence in the eurozone improves slightly in January.
  • Coming up: The ECB’s monetary policy announcements.

After spending the majority of the day moving sideways in a tight range above the 1.3150 mark, the EUR/USD pair gained traction in the last couple of hours and advanced to a fresh daily high of 1.1394. As of writing, the pair was up 0.28% on the day at 1.1390.

The broad-based selling pressure surrounding the greenback triggered by a sharp drop in the 10-year T-bond yield seems to be the primary catalyst behind the pair’s recent upsurge. The US Dollar Index, which rose above 96.30 earlier today, reversed its course in the NA session and was last seen down 0.25% on a daily basis at 96.06. Today’s data from the U.S., which were largely ignored by the market participants, showed that the Richmond Fed Manufacturing Index rose to -2 in January from -8 and house prices rose 0.4% on a monthly basis in December to match the previous reading.

Meanwhile, the European Commissions Flash Consumer Confidence Index in January edged up to -7.9 in January from -8.3 but fell short of the analysts’ estimate of -6.5. With today’s data out of the way, investors now turn their attention to tomorrow’s ECB announcements.

Previewing the event, “Developments in the euro area since the ECB’s December forecasts suggest a pivot in risks to the downside. Inflation lies sharply below their implied December forecast (though mostly on the back of lower oil prices), and growth in the final quarter of 2018 likely came in at half the ECB’s projected pace,” said TD Securities analysts. “The overall tone of the opening statement & presser should therefore sound cautious but constructive. The dovish risks we highlight are unlikely to materialize before mid-year.”

  • ECB Meeting Preview: 8 Major Banks expectations from January meet.

Key technical levels

With a decisive break above 1.1400 (daily high/50-DMA), the pair could target 1.1430 (Jan. 16 high) on the upside ahead of 1.1500 (psychological level/Jan. 2 high). Supports, on the other hand, align at 1.1350 (daily low), 1.1300 (Jan. 2 low) and 1.1270 (Dec. 14 low).

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