The war of words continues between North Korea and the US and this has been causing a lot of changes in the market dynamics over the past few days. We are seeing oil prices fall, gold prices shoot up, stock markets fall and in the middle of all this, the dollar does not know where it wants to go and this has helped the EURUSD pair to hold steady with a bullish undertone.
EURUSD Stays Strong
Over the last few days, we have seen a couple of attempts at the lows of the range with the pair trying to make a clear break through the 1.1720-1.1695 region but in both times, we are seeing the pair bounce back very strongly and this should send out a clear message to the market. One of these attempts was made yesterday but the pair has since recovered and it now trades well clear of the 1.1750 region as of this region and continues to look pretty strong for the short term.
The escalation of the tension between North Korea and the US has served to weaken the dollar a bit and this helped the euro to recover against the dollar yesterday. There is no sign of the tension abating and the stock markets are pretty much spooked about all this and that is why we are seeing the dollar on the backfoot as well. We expect the pair to continue to trade strongly as long as the lows of the range continue to hold.
Looking ahead to the rest of the day, the key economic event that the market has been expecting all week is the CPI data from the US which should give the market an idea about the inflation in the US. The inflation in the US has been soft during the course of this year due to lower prices and lower demand across sectors but a part of the market believes that the inflation should begin to tick higher pretty soon. So the CPI reading today will give us an idea on whether the economy is on the way to recovery or whether it continues to chop around and this will determine the short term direction for EURUSD.