EUR/USD: Looks to US inflation to break the monotony around mid-1.2100s

  • EUR/USD refrain from copying Tuesday’s run-up, refreshes intraday low.
  • Trading sentiment dwindles amid mixed updates, light calendar and pre-US CPI caution.
  • S&P 500 Futures drop 0.1%, US Treasury yields seesaw near previous day’s close.
  • Germany’s HICP, risk catalysts can offer intermediate moves.

EUR/USD turns red, refreshes intraday low to 1.2140, during Wednesday’s Asian session. The major currency pair jumped to the new high in 11 weeks the previous day as the US dollar dropped to unfamiliar territories since late February. While mildly bid US Treasury yields might have favored the quote on Tuesday, cautious sentiment ahead of the key US Consumer Price Index (CPI) seems to weigh on the pair of late.

Market’s mood sours as the coronavirus (COVID-19) vaccine updates have been mixed and the Middle East tensions escalate during the pre-data caution. The vaccine news mentions China’s sinovac as a strong cure to the pandemic while also spotting cases of blood clotting after the Johnson & Johnson covid vaccine inoculation.

It’s worth mentioning that the Fed policymakers’ sustained refrain from policy alteration seems to gain a little fanfare among the market bears expecting strong inflation to be in fashion going forward.

Against this backdrop, S&P 500 Futures drop 0.10% while the US 10-year Treasury yields take rounds to 1.62% by the press time.

The European Central Bank (ECB) policymakers reiterated their rejection to discuss tapering while also keeping the economic outlook brighter yesterday. Upbeat ZEW data from the bloc, US JOLTs Job Openings and NIFB Business Optimism Index also contributed to the EUR/USD upside.

Moving on, Germany’s Harmonized Index of Consumer Prices (HICP), expected to reaffirm an initial forecast of 2.1% YoY for April, can offer immediate direction to EUR/USD traders, coupled with the risk-related headlines. However, nothing matters more than the US Consumer Price Index (CPI) for April, expected to register a 3.6% yearly jump versus 2.6% prior. Traders will be particularly interested in a less sustained jump of inflation to pamper buyers.

Read: US Consumer Price Index April Preview: The two base effects of inflation

Technical analysis

A two-month-old rising wedge bearish formation restricts short-term EUR/USD moves between 1.2035 and 1.2200.

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