The euro extended its winning streak against the dollar on Friday, breaching the crucial 1.0900 level as the greenback continued its downward trajectory. While a brief respite for the dollar emerged following robust US producer price inflation data, the overall market sentiment tilted strongly in favor of risk assets, exerting downward pressure on the US currency.
The euro surged to its highest level since early June, breaching the 1.0900 mark on Thursday as the US dollar crumbled under the weight of unexpectedly soft inflation data. While the pair retreated slightly, it remained firmly entrenched above the 1.0850 support level on Friday.
The softer-than-anticipated Consumer Price Index (CPI) figures prompted a swift repricing of Federal Reserve policy expectations. Markets dramatically scaled back bets on a September rate hike, bolstering investor risk appetite and driving the dollar lower.
All eyes now turn to Friday’s Producer Price Index (PPI) data. A downside surprise could exacerbate the dollar’s weakness and propel EUR/USD higher, while an upside print might offer the greenback some respite, though the impact is expected to be limited given the already dovish market sentiment.
Technical Outlook on the EUR/USD Market
The EUR/USD pair remains in overbought territory, as indicated by the RSI hovering above the 70 level on the 4-hour chart, despite a late-session pullback on Thursday. However, the Bollinger Bands do not confirm this overbought signal, instead indicating a very strong bullish market. The bullish candlestick in the closing session was small, aligning with the smaller volume of trade histogram. This suggests that the EUR/USD market might still be poised for more bullish activity as the market opens. Considering the positive volume of trade readings alongside the ongoing bull run and price action above the 20-day moving average, there is a possibility that the bullish trend might continue to the previous high of $1.09790. Although the Fibonacci retracement indicator suggests that the price should weaken at the 23.6% level (1.08878), allowing for a correction, the price action has broken above this critical resistance level.
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