The EURUSD has extended its rally, climbing to a new session high of 1.1456 as the U.S. dollar remains under pressure following another round of softer-than-expected U.S. inflation data.
This week’s CPI and today’s PPI reports have reinforced the view that inflation pressures continue to ease, fueling expectations that the Federal Reserve may have greater flexibility to keep rate unchanged, and a door open for lower rates at sometime in the future if the trend continues
That shift in sentiment has pushed Treasury yields lower, with the 2-year yield down 5.6 basis points to 4.136% and the 10-year yield lower by 3.6 basis points to 4.549%, helping to weigh on the greenback and support the euro. The two year is still comfortably above 4.0% and the 10 year yield needs to get and stay below 4.5% to give the buyers in treasuries more confidence. From a technical perspective, the pair is once again approaching a very familiar resistance zone between 1.14618 and 1.14715.
The 1.14618 level has repeatedly capped rallies, with highs on July 3, July 10, and July 14 all stalling near that price. It also marks the 38.2% retracement of the decline from the May 27 high, adding to its technical importance. Just above, 1.14715 represents another critical hurdle.