After short-lived profit-taking, the dollar index regained the upside momentum to get back above the 100.00 figure ahead of the opening bell on Wall Street. Earlier in the day, the greenback derived support around 99.57 and trimmed yesterday’s losses amid a bounce. The buck was helped by both solid economic data out of the United States and the ECB meeting outcome that sent the euro lower across the market.
The central bank left its benchmark rate unchanged and reiterated its guidance that QE should end in the third quarter. As traders expected the bank to announce a more hawkish message, euro bulls were disappointed even as Lagarde highlighted that inflation has increased significantly and will remain high over the coming months. In the US, retail sales rose by 0.5% month-over-month in March, a bit less than the expected rate of 0.6%.
However, the core retail sales figure came in stronger than expected, suggesting consumer spending remains solid despite the elevated inflation. Strong figures imply that the Fed doesn’t need to take a more measured approach toward tightening.
Against this backdrop, EUR/USD plunged back below the 1.0900 level to register intraday lows around 1.0820. Should the pair hold above this intermediate support in the near term, the 1.0800 key hurdle for USD bulls will stay intact so far. Still, the overall fundamental and the technical picture suggests the path of least resistance for the common currency remains to the downside.
The dollar index is now marginally above the 100.00 handle, challenging the 100.20 zone, followed by two-year highs registered around 100.50 on Wednesday. On the downside, the price stays well above the 97.70 key support that triggered the latest multi-day rally in late March. As long as the index holds above this region, upside risks persist.
