/EUR/USD: Gains capped below 1.2350, focus shifts to US inflation | by Dhwani Mehta | FXStreet

EUR/USD: Gains capped below 1.2350, focus shifts to US inflation | by Dhwani Mehta | FXStreet

Bulls lacking momentum amid data-thin EUR calendar. The US CPI report and Draghi’s to set the tone this week. The EUR/USD pair stalled its consolidative range seen ahead of the 1.23 handle at the European open and broke to the upside. However, the uptick faded just shy of the 1.2350 barrier and the rates reverted to the familiar range near 1.2325 region, as markets lack fresh impetus in absence of any macro news from the Euroland. Moreover, it is believed that a large number of option expiries remain in play near the 1.2350 levels, keeping a lid on the prices. Despite the retreat, the spot remains well bid amid expectations of the narrowing monetary policy divergence, especially after the US wage growth numbers disappointed markets and suggested that the Fed could rein in a faster pace of tightening this year. Looking ahead, the next big risk event for the major is likely to be Tuesday’s US inflation report, which will shape up the next direction for the US dollar moves while ECB Chief Draghi’s speech on Wednesday could spur a fresh round of the EUR selling, in anticipation of a dovish speech. Draghi could say that the ECB doesn’t plan to taper quickly, in spite of the fact that the bank dropped its easing bias at its monetary policy meeting held last week. EUR/USD levels to watch Karen Jones, Analyst at Commerzbank, notes: “EUR/USD continues to be range bound within its February and February high was made at 1.2556 early March boundaries at 1.2556/1.2155. Minor support is offered by the 55-day moving average at 1.2249 ahead of 1.2165/55, the mid-January and current March lows. Further sideways trading between these levels and the current March high at 1.2447 remains to be seen. If bettered the January and February highs at 1.2538/56 would be back in the picture.” “Above the 2008-2018 resistance line at 1.2651 lies the 1.3190 50% retracement of the move down from 2008”, Karen adds.