- The dollar continues to slide amid an improvement in market sentiment.
- Nasdaq rises more than 1% and US yields move away from their lows.
- EUR/USD rises to test the 1.0600 area, at two-week highs.
The EUR/USD it has not stopped rising since the beginning of the European session and recently posted a new daily high at 1.0598. It remains near the daily high, on track for the highest daily close in two weeks and the first above the 20-day SMA since early April.
The dollar falls, Wall Street tries to recover
The dollar fell on Thursday and during the American session accelerated the decline as stock markets began to show signs of life. The Dow Jones lost 0.26%, while the S&P 500 and the Nasdaq rose 0.33% and 1.20%, respectively.
The dollar’s weakness was initially fueled by lower US bond yields and, more recently, by improving market sentiment. While European bonds remain relatively stable, Treasuries rise. The yield on US 10-year bonds went from above 3% on Wednesday to 2.81% on Thursday.
US economic data was largely ignored by market participants on Thursday. Initial jobless claims rose to 218,000, the highest level since January, while continuing claims hit the lowest level since 1,970. The Philadelphia Fed fell to 2.6 in May, against the market consensus of 16. Existing Home Sales fell 2.4% in April.
Earlier, the European Central Bank published the Minutes of its last meeting. Council members widely expressed concern about high inflation. “The hawks at the European Central Bank are calling the shots. The minutes of the ECB’s April meeting have just confirmed that the hawks are increasingly in control of the discussions. A rate hike in July is no longer uncertain, the only uncertainty is whether it will be 25bp or 50bp,” said Carsten Brzeski, Global Head of Macro at ING.
Better prospects for the euro?
The outlook for EUR/USD improves even in the current volatile and cautious market environment. If the pair manages to sustain above 1.0600, it could add support for a more sustainable recovery. The next target is the May high at 1.0641. Above, the next strong barrier awaits at 1.0750.
A retracement below 1.0545 (20-day SMA) would ease the upside momentum. Below, attention would turn to 1.0480 and then 1.0455 (18-19 May lows).
The main trend in EUR/USD is down, but a firm recovery above 1.0650 could point to a temporary bottom.
Technical levels
Source: Fx Street
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