EUR/USD with a chance for a greater recovery?

Yields on two-year US bonds yesterday reached their highest level since 2006. Stock indexes ended the day mixed. The dollar only strengthened for a while, EUR / USD exchange rate approached 1,06 and is currently testing the upper band of the descending channel. This market picture emerged after the publication of retail sales in the US, which turned out to be stronger than expected.

Biden's meeting with representatives of Egypt and the Palestinian Authority was canceled. In the Gaza Strip, an attack on a hospital took place, killing at least 500 people.

Fed more restrictive?

Retail sales and industrial production in the US provided further information about the condition of the American economy. The higher-than-expected numbers increase speculation that the Fed will remain restrictive for longer. That's where it came from increase in the yield of US treasury securities. 2-year-olds were at their highest level since 2006. Market valuations indicated an increased chance of the Fed raising rates again this year. However, the dollar index failed to set a new high.

The stock market session in the US was mixed, the industrial Dow Jones was a cosmetic plus of 0,04%, while the SP500 and Nasdaq Composite they lost 0,01% respectively. and 0,25 percent

The euro, in turn, managed to gain before noon after index of the ZEW institute turned out to be much better than expected. Score -1,1 points. caused the EUR/USD rate to "climb" to higher levels and, despite subsequent arguments for a stronger dollar, the EUR/USD rate closed the day higher, approaching the level of 1,06.

The dollar is the currency of first choice

It is clear that the dollar is having problems with strengthening, although if there is an even greater escalation of tensions in the Middle East, the USD may once again play the role of the currency of first choice. We already know that today Biden canceled his meeting with the leaders of Egypt and the Palestinian Authority. However, he will meet with representatives of the Israeli government. Yesterday, there was a rocket attack on a hospital in the Gaza Strip, which killed several hundred people. The matter is dynamic and a sudden increase in risk aversion may occur at any time.

Returning to the EUR/USD rate, it can be seen that the quotations are once again testing the upper band of the falling channel, which has been going on since approximately July 18. An earlier attempt (October 12) to "break" the rate upwards ended in failure. At that time, the dynamic declines were the result of US inflation data. On the graph potential oRGR formation is also visible, which may bring a slightly greater recovery in the eurodollar, at least in the short term.

Source: Łukasz Zembik, OANDA TMS Brokers