- US dollar remains weak, but losses are limited.
- Wall Street rises sharply, US yields at fresh 2-day highs.
- EUR/USD short-term outlook is bullish, and faces resistance at 1.0730 and 1.0750.
The EUR/USD rose further during the American session and printed a fresh daily high at 1.0729. It then pulled back, staying above 1.0700. The euro is holding onto important weekly gains.
Bullish but capped under 1.0750
The recovery of EUR/USD appears to be resuming after a pullback from the 1.0750 area to 1.0640. The euro remains below the recent top but the chart still shows some positive momentum. A break of 1.0730 should clear the way for a test of 1.0750. The next resistance stands at 1.0765. A deli back below 1.0700 would alleviate the pressure. And under 1.0645, the pair could drop to test the important support area of 1.0600.
The move higher on Thursday is being driven by a weaker US dollar and risk appetite, the day after the FOMC minutes. The DXY is falling 0.12%, under 102.00. Equity prices in the US are up considerably. The Dow Jones gains 1.72% and the Nasdaq 2.87%.
The improvement in market sentiment is keeping the dollar on the defensive. At the same time, US yields are reacting. The US 10-year rose to 2.78% and the 30-year to 3.02%, both at 2-day highs.
Economic data from the US came in mixed on Thursday. The second reading of Q1 GDP showed a negative revision from -1.4% to -1.5%. Initial Jobless Claims dropped more than expected to 210K while Continuing Claims rose to 1.34 million above the 1.31 million of market consensus. The Kansas Fed Manufacturing Index declined unexpectedly in May to 19 from 28, against an expectation of 37. On Friday, Personal Income and Spending data are due in the US, including the Core PCE.
Ahead of a long weekend in the US, the EUR/USD is holding into important weekly gains as it continues to rebound from multi-year lows. During the last two weeks, it gains more than 300 pips. “EUR/USD looks to have stalled at the top of a potential 1.02-1.08 trading range this summer and we could quite easily see a near-term move back towards the 1.0500/1.0550 area as the Fed cycle is repriced higher”, analysts explained at ING.