EURUSD jumps. ECB crisis tool talk gives the pair a lift

The EURUSD has bounced and in the process, moved back above the swing lows from Wednesday and Thursday between 1.0863 and 1.0873. The price is currently trading at 1.0873 which is just below the close from yesterday at 1.0878. The high price reached 1.0879 so far.

As outlined in an earlier post, a move back above the swing area threatens the seven day decline seen in the EURUSD. The failure on the break – at least in the short term – will now have traders eyeing the 1.08633 level as support. If it can hold, getting above the close from yesterday, and moving toward other upside targets will be eyed.

On the upside more momentum would look toward 1.0900, followed by the falling 100 hour MA at 1.0914.

What is the catalyst?

The move higher in the EURUSD corresponded with the headlines from the ECB of a “crisis tool” to be activated if bond yields rise (sounds like quantitative easing to me).

Yes, yields have risen as  inflation 
Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Read this Term rises. Admittedly, the rise has been impacted by first supply chain constraints and now the Ukraine war, but inflation can beget inflation. Yields are a way the “market” users to slow down inflation and that may come at the cost of growth. Yields across Europe are higher but that is what is supposed to happen.