The US inflation report will provide a fresh directional impetus to the EURUSD pair

The euro resumed the upside on Tuesday, erasing yesterday’s losses as the dollar is back under pressure. The USD index failed to overcome the 96.00 handle at the start of the week and has been struggling to regain the upside momentum since then. Of note, the greenback hasn’t derived significant support from a rise in 10-year Treasury yields to fresh two-year highs and the prevailing risk-off sentiment in the global financial markets. 

The EURUSD pair briefly dipped below 1.1300 before bouncing to local highs in the 1.1350 area ahead of Lagarde’s speech. However, the prices slipped back to the 1.1330 area in recent trading. Suggesting the euro’s upside potential stays limited. Should the ECB Governor express a dovish tone, the common currency could come under renewed downside pressure.

Furthermore, Powell will testify before the US Senate later in the day. Should he hint at an early rate hike, the dollar bulls may reenter the game and thus push the euro lower. In a wider picture, EURUSD continues to track the policy divergence between the ECB and the Federal Reserve. 

Traders will also take cues from the release of the latest US consumer inflation figures on Wednesday. The report will provide a fresh directional impetus to the EURUSD pair. The inability to hold above 1.1300 would shift market focus back to the 1.1270 zone, followed by the 1.1235 area. 

Despite the current weakness, the dollar remains within a broader uptrend and could yet jump to fresh long-term highs in the medium term. The USD index was last seen changing hands around 95.83, down 0.17% on the day. 


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