The Euro Edges the Dollar, But Is 1.0890 Within Reach For EURUSD?

Summary:
• The euro currently has an upper hand against the US dollar, as EURUSD traders cash in on Christine Lagarde’s comments. But could that change?

EURUSD has inched up in the early Asian session on Tuesday, buoyed by falling US Treasury yields. The pair was up closed trading above 1.0850, on Monday and had added +0.10% to trade at 1.0862 at press time. European Central Bank President Christine Lagarde reiterated on Monday that the focus remains on bringing down inflation to 2%.

Furthermore, the Eurozone economy seems to have picked up in this quarter at current interest rates. Therefore, the market certainly interpreted Lagarde’s statement as hawkish. The euro has certainly gotten an upthrust from her assertion that the current interest rates ought to be kept for a “sufficiently long duration” in order to tackle inflation. The headline inflation on the EU came down to 2.8% in January. This was helped, in part by a decline in energy prices by 6.1% and food price inflation, which reduced to 5.6%.

EURUSD will get a fresh impetus when two key high-impact macroeconomic statistics come out. The Core Durable Goods Orders for January measures consumer demand for durable items, providing insight into consumer spending trends. The Consumer Confidence reading for February gauges consumer sentiment, reflecting their outlook on the economy and their spending intentions. Both statistics are closely watched by market participants and can potentially lead to market volatility. The two releases’ impact will however be subdued by time constraints. A more powerful release will come barely 24 hours later when US GDP figures for the fourth quarter of 2023 comes out.

The euro is likely to have the upper hand in the intervening period before the key macroeconomic data releases, as reduced yields on US treasuries exert downward pressure on the dollar. Both the 10-year and 5-year US Treasury yields are down by 3 basis points as of this writing.

Technical analysis

The EURUSD pair’s momentum is fluctuating with a slight advantage for the bulls. The pivotal point is at 1.0835, from where the bulls aim to reach 1.0875. If they succeed, they may gain momentum to push towards 1.0890. However, if the bulls lose their grip, the pair might fall below 1.0835, with support at 1.0820. Continued dominance by the bears could lead to a test of 1.0810.