EUR/USD cuts losses, around 1.0530 ahead of EMU CPI

The upside in the greenback now seems to be taking a breather, allowing EUR/USD to trim part of the initial drop and retake the 1.0530/40 band.

EUR/USD attention to EMU CPI

The pair is now posting small losses, managing to come back from yesterday’s fresh weekly lows near 1.0510 always in a context favourable to the US Dollar.

The increasing buying interest around the buck stays unabated so far this week, as market bets for a Fed’s rate hike at its meeting on March 15 remains on the rise. According to CME Group’s FedWatch tool, the probability of a 25 bp rate hike this month have climbed to almost 67% from just above 33% the previous day.

Collaborating with the pair’s decline, recent Fedspeak and auspicious results from the US docket have lifted US yields, adding to the view of a stronger buck. Furthermore, New York Fed and permanent FOMC voter W.Dudley said earlier in the week that the case for further tightening has become ‘compelling’.

In spite of the strong selling bias surrounding the pair, the recent rally in German yields have somewhat mitigated the downside, adding strenght to the support area near 1.0500.

Data wise in the euro bloc, EMU’s advanced inflation figures for the month of February will be in the limelight later in the session. Recent upside surprises in both Spanish and Italian CPIs add to the case for a continuation of the up trend in consumer prices in the region.

Across the Atlantic, US Initial Claims are only due ahead of Friday’s ISM Non-manufacturing.

EUR/USD levels to watch

At the moment the pair is losing 0.11% at 1.0535 and a breach of 1.0522 (low Mar.2) would open the door to 1.0492 (low Feb.22) and finally 1.0452 (low Jan.11). On the flip side, the next hurdle lines up at 1.0594 (55-day sma) followed by 1.0619 (20-day sma) and then 1.0632 (high Feb.28).