EUR / USD clears daily losses and returns above 1.1300 after reaching new lows of the year near 1.1260

• EUR / USD accelerated the decline and reached 1.1260 before rebounding.
• DXY turns negative after hitting 16-month highs beyond 96.00.
• Eurozone inflation: CPI rises 0.3% in October, 2% year-on-year.

The euro managed to regain ground and pushed EUR / USD back to 1.1300 and beyond, after previously falling to 1.1262, the new low since July last year.

EUR / USD focuses on the dollar and Lagarde

After bottoming out in the vicinity of 1.1260, EUR / USD bounced strongly to 1.1321. At time of writing, it is trading at 1.1315, around the level where it closed on Tuesday.

The downtrend continues to be sustained by the strength of the dollar, supported by dynamics in Treasury yields, concerns about rising inflation, and market talks regarding the growing possibility that the Federal Reserve will have to raise rates ahead of schedule.

The final inflation data for the Eurozone showed no surprises. The CPI rose 0.3% in October and advanced 2% compared to a year ago. Later, the president of the European Central Bank (ECB), Christine Lagarde will post a video message and attend an event in Germany, while Governing Board member Isabel Schnabel will speak on the outlook for economic and monetary policy. Several members of the Fed will also speak.

Short-term outlook

The dominant trend of EUR / USD remains bearish. In the very short term, the rebound in question has managed to alleviate downward pressures. An extension beyond 1.1330 will give more strength to the euro to extend the rise or at least to stabilize at levels far from the recent floor. On the other hand, a return below 1.1285 would once again leave the pair vulnerable for further losses.