The currency failed to preserve gains, slipping back to local lows despite steadier bond yields

Following a short-term spike seen yesterday, the US dollar index is back under pressure ahead of the weekend. While US 10-year yields bounce off lows near the 1.54% level, the USD index is getting weaker, challenging the 91.00 mark during the European hours.

Thursday’s bullish price action around the greenback was due to strong jobless claims data coupled with President Biden’s plans to increase the capital gains tax and rising coronavirus cases in India and Japan. However, the US currency failed to preserve gains, slipping back to local lows despite steadier bond yields and mixed risk sentiment.

Against this backdrop, EURUSD came off lows under the 1.2000 psychological level, rebounding to the 100-DMA on Friday. Still, the pair lacks momentum to overcome this barrier in the 1.2055 area despite upbeat economic data out of the Eurozone. The manufacturing PMI improved from 62.5 in March to 63.3 in April and beat 62.0 expectations. Furthermore, the gauge hit the highest since June 1997. Services PMI jumped to eight-month highs of 50.3 in April versus 49.1 expected and 49.6 last.

Elsewhere, the ECB Survey of Professional Forecasters for the second quarter of 2021 showed a downward revision to the real GDP expectations for this year and upward in 2022, implying a further delay in recovery.

From the technical point of view, the common currency needs to make a decisive break above the 1.2080 region in order to see more gains next week. If the mentioned moving average doesn’t give up any time soon, the pair could see a local downside correction. In this scenario, the 1.2000 figure will come back into market focus. Also, EURUSD may retreat later today if US PMIs surprise on the upside and thus send the greenback higher across the board.


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