Introduction
The EUR/USD pair rallied on Thursday, surging by 0.6% and trading slightly above the psychological 1.0900 level. The boost in risk-on sentiment, combined with broad-based U.S. dollar weakness, contributed to the surge. Additionally, the higher-than-expected inflation data in Germany also played a significant role in the rally. The pair is now threatening to recapture this month’s high and on the verge of overtaking a pivotal trendline resistance. In this article, we will explore the reasons behind the rally and its potential impact on the market.
Why did EUR/USD Rally on Thursday?
There were several factors that contributed to the rally of the EUR/USD pair on Thursday. Firstly, there was a boost in risk-on sentiment, which is when investors become more willing to take on riskier assets. This was due to the positive economic data from the United States, which showed a decline in jobless claims, indicating a strengthening job market. As a result, investors became more optimistic about the economic recovery, leading to a boost in risk-on sentiment.
Secondly, the broad-based U.S. dollar weakness also contributed to the rally of the EUR/USD pair. This weakness was due to the positive economic data and the decline in jobless claims. Additionally, the ongoing concerns about the pandemic and the slow pace of the vaccine rollout in the United States also contributed to the dollar weakness.
Finally, the higher-than-expected inflation data in Germany also played a significant role in the rally of the EUR/USD pair. Germany reported a 1.7% increase in inflation, higher than the expected 1.5% increase. This led to a boost in the euro and contributed to the rally of the EUR/USD pair.
What is the Impact of the Pivotal Trendline Resistance?
The EUR/USD pair is currently on the verge of overtaking a pivotal trendline resistance. This resistance is significant because it has acted as a barrier to the pair’s upward movement since February 2021. If the pair manages to break through this resistance, it could signal a potential shift in the market sentiment, leading to a further rally of the EUR/USD pair.
However, it is important to note that the pivotal trendline resistance is not the only factor that will determine the direction of the EUR/USD pair. Other factors, such as the ongoing pandemic, the global economic recovery, and the central banks’ monetary policies, will also play a significant role in the pair’s movement.
Conclusion
The EUR/USD pair rallied on Thursday, driven by a boost in risk-on sentiment, broad-based U.S. dollar weakness, and higher-than-expected inflation data in Germany. The pair is currently threatening to recapture this month’s high and on the verge of overtaking a pivotal trendline resistance. While the pivotal trendline resistance is significant, other factors such as the ongoing pandemic, the global economic recovery, and the central banks’ monetary policies, will also determine the direction of the EUR/USD pair. Investors should closely monitor these factors to make informed trading decisions.
