EUR/USD Tests Multi-Month Highs As Traders Bet On A Less Hawkish Fed

Key Insights

• EUR/USD tested resistance at 1.0660 as U.S. inflation declined to 7.1%. 
• AUD/USD settled above the 0.6850 level amid a broad rally in commodity markets. 
• NZD/USD tested the 0.6500 level.

EUR/USD Rallies After U.S. Inflation Reports

EUR/USD tested resistance at 1.0660 after the release of U.S. inflation reports. Inflation Rate declined from 7.7% in October to 7.1% in November, while Core Inflation Rate decreased from 6.3% to 6%.

Today, traders also had a chance to take a look at the Euro Area ZEW Economic Sentiment Index report, which indicated that Economic Sentiment improved from -38.7 in November to -23.6 in December, compared to analyst consensus of -25.7.

Currently, EUR/USD is trying to stay above the 1.0630. In case this attempt is successful, EUR/USD will get to another test of the resistance level at 1.0660. A move above 1.0660 will push EUR/USD towards the next resistance at 1.0700.

On the support side, a move below 1.0630 will open the way to the test of the support at 1.0600. If EUR/USD declines below 1.0600, it will head towards the support at 1.0550. A successful test of this support level will push EUR/USD towards the support at 1.0500.

U.S. Dollar Is Under Strong Pressure

U.S. Dollar Index  retreated below the 104 level as traders reacted to the U.S. inflation data. The yield of 10-year Treasuries moved towards the 3.45% level as traders bet on a less hawkish Fed.

The Fed decision will be announced tomorrow, and market participants believe that the central bank may send dovish signals.

GBP/USD Tests The 1.2400 Level

GBP/USD is currently trying to settle above the 1.2400 level as demand for riskier assets rises after the release of U.S. inflation data.

In the UK, traders focused on the Claymant Count Change report for November. The report indicated that the number of people claiming for unemployment benefits increased by 30,500. Most likely, traders will stay focused on U.S. inflation reports ahead of tomorrow’s Fed decision.

AUD/USD Tests Multi-Month Highs

AUD/USD rallied towards 0.6880 amid a broad rally in commodity markets. Other commodity-related currencies have also enjoyed strong support as traders focused on the rally in commodity markets and weaker dollar.

NZD/USD has recently made an attempt to settle above the 0.6500 level. USD/CAD pulled back below 1.3550.

USD/JPY Tries To Settle Below The 135 Level

Not surprisingly, U.S. inflation data put significant pressure on USD/JPY. Currently, USD/JPY is trying to settle below the 135 level. In case this attempt is successful, it will continue to move towards December lows near 133.50.

For a look at all of today’s economic events, check out our economic calendar.