EUR/USD Faces Stern Test as Inflation Data Takes Center Stage: Key Trading Levels

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EUR/USD News

US Dollar Index Futures

Forex Analysis by Fawad Razaqzada covering: EUR/USD, US Dollar Index Futures. Read Fawad Razaqzada's latest article on Investing.com

lost its earlier gains on Tuesday, before dropping slightly in the first half of Wednesday’s session following the release of a weaker-than-expectstrengthened against most other currencies, helped in part by stocks and bonds easing lower again. Attention will turn to the upcomingfor May and the resulting increase in US bond yields, which found additional support from weak auctions of two- andTreasuries. The Fed’s ongoing hawkish tone has also been a supporting factor for the dollar.

Negotiated wages in Q1 rose 4.7% year-over-year, compared to an expected drop to 4.0% from 4.5% in Q4. This situation presents a major dilemma for the ECB ahead of its June rate decision. However, judging by the just-released German CPI report, the rate cut may go ahead anyway given that the ECB has built it up so much.The Fed's preferred inflation measure, the Core PCE, will be released on Friday, drawing attention to major FX pairs, including EUR/USD.

The EUR/USD remains stuck in consolidation, unable so far to climb decisively above April’s high of 1.0885. Short-term resistance is at 1.0885-95, which held after this week’s earlier test. Here, the EUR/USD topped in April and found resistance in the last couple of weeks. A clean breakout above here could pave the way for a potential rise toward the March high of 1.0981 and subsequently the 1.10 handle.

 

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