EUR/USD hits fresh four-week highs above 1.1160 amid a weaker dollar

• US dollar under pressure as US yields pullback.
• EUR/USD heads for the highest daily close in a month.
• Economic data shows accelerating inflation in Germany and job creation in the US.

The EUR/USD rose further during the American session and printed a fresh four week high at 1.1170. The pair is rising for the second day in a row, headed toward the highest close in a month.

A weaker US dollar is keeping the bullish tone of EUR/USD intact. Technical factors contribute to support the upside. The pair is holding well above 1.1100 and also breaking the 1.1135 resistance area.

The DXY is trading at weekly lows at 97.75, as US yields slide. The 10-year stands at 2.36%, away from the 2.43% it hit earlier on Wednesday. Equity prices in Europe ended lower amid skepticism about Russian withdrawing some troops from Kiev. In Wall Street stocks are off lows. Commodity prices are higher, weighing on the dollar.

Inflation up in EZ while US keeps creating Jobs

Inflation data from Germany came in above expectations, with the annual rate reaching 7.3%, the highest since 1981. The acceleration in prices creates a challenging environment for the European Central Bank (ECB). “The ECB will want to focus on inflation expectations and as long as these expectations remain fairly anchored, we only expect an end of the so-called unconventional measures over the next 12 months, i.e an end to net asset purchases and an end to negative deposit rates. It would need a clear end to the war, lifted sanctions combined with stepped up fiscal stimulus to engage the ECB in a more genuine tightening cycle”, wrote Carsten Brzeski, Global Head of Macro at ING.

In the US, the ADP employment report came in line with expectations showing an increase in private jobs of 455K. The third 4Q GDP reading showed a 6.9% expansion, below the 7% of previous estimates. The numbers did not affect the dollar. On Friday, the official employment report is due with Non-farm payrolls and the unemployment rate.

Technical levels