In part, this looks to be a bit more of a dollar move as the greenback is also holding decent gains now against the pound, franc and loonie as well.
However, there might also be a little something to it with the Eurozone CPI data earlier – which showed slightly softer core prices. Bond yields have unsurprisingly fallen back after the data release. But the fact that it doesn’t give the euro a reason to rally i.e. no panic for a 50 bps rate hike is reason enough for traders not to pile on the misery for the dollar.
In the past month or so, there is that slight divergence in policy hawkishness between the ECB and Fed. And that has provided a tailwind for the euro to rally against the dollar, especially as traders question the Fed’s appetite in the aftermath of the banking turmoil.
As such, the Eurozone CPI data today is perhaps a welcome development for EUR/USD sellers when you take the above into consideration.
In the bigger picture though, EUR/USD has been struggling to hold a firm break above 1.1000 with weekly resistance still firmly planted at the 2 February high of 1.1033.
Buyers will need to break above that going into the weekly close to really convince of the next upside leg for the pair. And if the ECB is likely to stick with a 25 bps rate hike given the data from today, then the euro would have to rely on some sprinkles of Fed dovishness to secure a breakout move.
This article was written by Justin Low at www.forexlive.com.
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