- The US Dollar strengthened sharply following US inflation data.
- The EUR/USD pair was rejected from above 1.0630 and tumbled.
- The short-term outlook remains bearish, with the following support levels at 1.0520 and 1.0490.
A stronger US Dollar has pushed the EUR/USD pair from weekly highs above 1.0630 towards 1.0520. US economic data reflects that fundamental factors still favor the Greenback, and combined with higher Treasury yields, exerted downward pressure on the pair.
The European Central Bank (ECB) released the minutes of its September meeting, revealing that "a solid majority of members" supported a 25 basis points interest rate hike. "The decision between raising rates and pausing was a close call, with tactical considerations also playing a role." The document did not have a significant impact on the Euro. On Friday, Eurostat will release Industrial Production data for August, and ECB President Lagarde will participate in a panel discussion at the annual meeting of the World Bank and the International Monetary Fund.
The key driver on Thursday was the US Dollar, which was boosted by higher US yields. The Consumer Price Index (CPI) rose 0.4% in September, slightly above the market consensus of 0.3%. However, combined with the wholesale inflation data from Wednesday, it added evidence to the narrative of higher interest rates for a longer period.
The US Dollar gained momentum after the data and accelerated amid higher Treasury bond yields. The 10-year yield rose from 4.52% to 4.72%; it climbed more than 3% on the day. The Greenback ended its correction and could continue to rise, to test cycle highs, as fundamentals continued to favor it. On Friday, the University of Michigan Consumer Sentiment survey is due.
EUR/USD short-term technical outlook
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The EUR/USD sharply reversed, falling from weekly highs, erasing days of gains. The decline has found support at 1.0525 so far, but bearish pressure persists ahead of the Asian session. Technical indicators on the daily chart have turned bearish, and the price is now below the 20-day Simple Moving Average (SMA).
The reversal of EUR/USD took place near a key dynamic resistance, which marks the upper limit of a downward channel. Technical indicators on the 4-hour chart point to further losses, but the pair is currently near the 1.0520 support level. Below that area, the next support comes at 1.0500. If consolidation occurs below 1.0490, it would increase the bearish pressure and expose 1.0460, slightly above October lows.
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