EUR/USD at fresh 4-week highs above 1.1160

  • US dollar under pressure as US yields pull back.
  • EUR/USD is headed for the highest daily close in a month.
  • Economic data shows an acceleration of inflation in Germany and job creation in the US.

The EUR/USD rallied further during the US session and hit a fresh four-week high at 1.1170. The pair is rising for the second day in a row, heading for the highest close in a month.

A weaker US dollar keeps the bullish tone of EUR/USD intact. Technical factors help support the upside. The pair remains well above 1.1100 and also breaks the 1.1135 resistance area.

DXY is trading at weekly lows at 97.75 as US yields slide. The 10-year Treasury yield stands at 2.36%, far from the 2.43% it reached on Wednesday. Stock prices in Europe ended lower amid skepticism about a Russian withdrawal of some troops from kyiv. On Wall Street, stocks are far from lows. Commodity prices are higher, weighing on the dollar.

Inflation rises in EZ as US continues to create jobs

Inflation data from Germany exceeded expectations, with an annual rate reaching 7.3%, the highest since 1981. Accelerating prices create a challenging environment for the European Central Bank (ECB). “The ECB will want to focus on inflation expectations and as long as these expectations remain fairly anchored, we only expect the end of the so-called unconventional measures over the next 12 months, that is, the end of net asset purchases and the end of of negative deposit rates. It would need a clear end to the war, sanctions lifted combined with intensified fiscal stimulus to engage the ECB in a more genuine tightening cycle,” wrote Carsten Brzeski, Global Head of Macro at ING.

In the US, the ADP employment report was in line with expectations showing an increase in private jobs of 455,000. The third reading of the fourth quarter GDP showed an expansion of 6.9%, down from 7% in previous estimates. The numbers did not affect the dollar. The official employment report with non-farm payrolls and the unemployment rate is presented on Friday.

Technical levels

Source: Fx Street

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