The EUR/USD price rose to its highest levels since March 18 as forex investors continued to focus on the recent US inflation numbers. They are also refocusing on the US retail sales and jobless claims numbers scheduled for tomorrow. It is trading at 1.1960, which is 2% above the lowest level this year.
US inflation and retail sales
The US published relatively strong inflation numbers yesterday. The data revealed that the headline consumer price index (CPI) rose from 0.4% in February to 0.6% in March.
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In turn, this pushed the year-on-year increase to 2.6%, up from the previous 1.7%. It was the highest it has been in almost eight years. The core CPI rose from 1.3% to 1.6%.
Most notably, the consumer inflation figure was higher than the Fed’s target of 2.0%. However, the performance of the US dollar and bond yields is sending a signal that the market is unfazed. The dollar index dropped to the lowest level since March while the 10-year bond yield dropped to 1.63%. Last week, the benchmark yield rose to 1.76%.
This performance is mostly because the market expects the current inflationary regime to be temporary. Furthermore, the impact of the recent $1.9 trillion stimulus package will soon start fading. Also, the price of crude oil has moved below its year-to-date high and the logjam in US ports will start to ease.
Looking ahead, the EUR/USD will react to a speech by Jerome Powell. Judging by his recent statements, he will likely commit to leaving interest rates and quantitative easing policies intact. On Thursday, the pair will react to the latest US retail sales and jobless claims numbers. Economists expect the data to show that overall sales rose by 5.0% last month after falling by 3% in February. They also see more than 700k Americans filing for jobless claims.
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The four-hour chart shows that the EUR/USD pair has been on a strong upward trend lately. This week, it moved above the 61.8% Fibonacci retracement level. It is above the 15-day and 25-day moving averages. Further, the pair has risen above the bullish pennant pattern shown in black. Therefore, in the near term, the pair will likely keep rising as bulls target the 50% retracement level at 1.2025. However, a drop below the important support at 1.1850 will mean that there are still more bears in the market.