Euro Bulls See US CPI Data as a catalyst for push towards $1.10
The euro's rally against the dollar has stalled over the past month at resistance around its May high. Bulls are hoping that the US inflation data will provide enough ammunition for it to break out of that barrier and resume its progress toward $1.10.
The share price has strengthened almost 14% from a two-decade low of 95.36 US cents set in November, as traders have wound back bets on Federal Reserve interest-rate hikes. The euro hasn't broke above the level of $1.0787 reached on May 30, but it has so far been unable to break above that level.
Narrowing bond yield spreads between the US and Europe suggest that the euro will test the May high if Thursday s US consumer-price data shows signs of moderation, according to Canadian Imperial Bank of Commerce.
A breach of the May high could see the pair test the April 25 high of $1.0851, while there is strong resistance at $1.0936, said Jeremy Stretch, head of Group-of- 10 strategy at CIBC in London.
I remain skeptical that EURUSD can extend its recent gains without a significant shift in the fundamental outlook for the pair, given that it already looks expensive relative to the short-term fair value of 1.05, said Valentin Marinov, head of Group-of- 10 FX research and strategy at Credit Agricole CIB in London.
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