EUR/USD accelerates losses to new monthly lows near 1.0520

  • EUR/USD loses further ground and revisits 1.0520.
  • The US Dollar Index stays bid and approaches 104.00.
  • US CPI rose at the fastest pace in the last 40 years in May.

The European currency comes under further pressure and motivates EUR/USD to slip back to the 1.0520 region on Friday, or new 3-week lows.

EUR/USD weaker post-US CPI

EUR/USD sheds further ground after the greenback saw its upside exacerbated in response to higher-than-expected US inflation figures measured by the CPI for the month of May.

Indeed, the headline CPI rose 1.0% MoM in May and 8.6% over the last twelve months. The Core CPI, in the meantime, went up by 6.0% from a year earlier.

The release of US inflation figures reaffirmed the idea of ​​an aggressive tightening by the Federal Reserve on the near-term horizon, with a 50 bps rate hike already priced in at the June and July gatherings.

Furthermore, Fed Funds futures now point to nearly 3.00% by the end of 2022.

Later in the NA session, the flash US Consumer Sentiment is due.

What to look for around EUR

EUR/USD came under extra pressure in response to the multi-decade highs in US inflation recorded in May.

The resumption of the selling bias in the pair followed the accelerated inflows into the greenback on the back of now firmer conviction of a tighter Fed policy in coming months.

EUR/USD remains far away from exiting the woods and it is expected to remain at the mercy of dollar dynamics, geopolitical concerns and the Fed-ECB divergence, while higher German yields, persistently elevated inflation in the euro area and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.

Eminent issues on the back boiler: Speculation of the start of the hiking cycle by the ECB as soon as this summer. Asymmetric economic recovery post-pandemic in the euro bloc. Impact of the war in Ukraine on the region’s growth prospects.

EUR/USD levels to watch

So far, spot is losing 0.69% at 1.0542 and a breach of 1.0521 (monthly low June 10) would target 1.0500 (round level) en route to 1.0459 (low May 18). On the other hand, the immediate up barrier emerges at 1.0786 (monthly high May 30), seconded by 1.0925 (100-day SMA) and finally 1.0936 (weekly high April 21).


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