Before opening positions in EURUSD today, it is better to wait for the CPI report

On Tuesday, May 11, at the end of the day, the EUR / USD pair increased by 0.14% to 1.2145. In the European session, the price climbed to 1.2182. Euro has risen in price on excellent statistics. German investor sentiment surged in May to its highest level since the start of the COVID-19 pandemic.

In the American session, buyers retreated to 1.2145 after failing to break through 1.2180. The attempt failed due to the rise in the yield of US bonds to 1.628%.

Scheduled statistics (GMT + 3)

  • At 12:00 the eurozone will announce a change in industrial production for March.
  • Bank of England Governor Andrew Bailey will deliver a speech at 11:00.
  • At 15:30 the US will present the CPI for April.
  • At 17:30 the US will announce a change in oil reserves according to the Department of Energy.
  • At 21:00 in the United States will be released the report on the execution of the budget for April.

Current situation

At the time of this writing, the dollar is trading in positive territory against major currencies. The largest losses are incurred by the Australian dollar (-0.40%) and the New Zealand dollar (-0.51%). When AUD and NZD go down, we can say that the market is risk – off. A wave of selling could have been caused by a fall in futures for US stock indices, as well as news from China and Australia.

In China, the Dalian Commodity Exchange has proposed lowering the standard iron content requirements for its futures to expand the supply of iron ore to the PRC and contain an increase in iron ore prices. Australia is the largest producer and importer of high quality iron ore to China. The decline in prices will reduce export earnings to the Australian budget.

The Reserve Bank of Australia believes the country is likely to lose its AAA rating following the release of the S&P’s annual survey. The regulator believes that the downgrade will have little effect on government bonds.

Futures on US indices declined on expectations of the release of the US inflation report. The euro recovered to 1.2137 from 1.2115, but remains trading in the red (-0.10%). The nervous situation will persist, as the strengthening of the single currency is holding back the growth of US bond yields (us10Y). The yield on US10Y declined slightly, and the euro recovered. If the fall intensifies before the release of inflation data, the EUR / USD pair will return to the level of 1.2150 (balance line).

Summary: Market participants are expecting the April US inflation report. After weak data on the US labor market, market participants do not know what to expect from the data. The slowdown in inflation will support the single currency, as the yield on Treasury bonds will decrease. If the 10-year yield falls to 1.56%, then the EUR / USD pair will renew its maximum. In any case, it is worth waiting for the release of the report to decide in which direction to trade the euro.

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