The EURUSD takes a day off as the dollar rumbles

It's a bit of a mess, isn't it?

While the headlines will say US bond yields rose, stocks got hit, the dollar rallied on whatever, the EURUSD is sheepishly mired in a 44 pip trading range, 2 pips away from the closing level (closed at 1.1233). What's with that? GBPUSD falls 160 pips and the EURUSD is unchanged.

There may be some that will say risk off (stocks getting hit) for the NZD, AUD and CAD plus commodities are lower. The GBPUSD story? Well inflation data was lower than expected in the UK despite the lower GBP.

What is the EURUSD story? Well PMI data out of Europe today was a little weaker but there was no reaction.

So I guess, the story is that it was a sick day for the EURUSD. It took the day off. There was no push off the cliff like the GBPUSD experienced.

There also was some big headwind from the buyers in the EURGBP. When that pair goes higher like it has today and the GBPUSD is moving down at an equal pace like it has today, mathematically, the EURUSD get's stuck in the mud. The EURGBP is derived from the combination of the EURUSD rate and the GBPUSD rate. If the GBPUSD and the EURGBP are moving in lockstep, the EURUSD sits.

What might help the EURUSD catch up a little to the GBPUSD? Well one way is if the EURGBP were to reverse. It that happens, the EUR relatively to the GBP gets weaker. If that is the case, the EURUSD may go down. May? Yes just "may" because it may be that the EURGBP goes down because the GBPUSD rallies back up. The EURGBP just tells the story of relative value of the EUR vs the GBP. It does not talk about the relative value of the EUR and GBP vs the USD. So nothing is guaranteed, but you would expect if the EURGBP goes down, so would the EURUSD. The chart below has seen the price of the EURGBP indeed start to come down off the 50% retracement level and that is starting to put some pressure on the EURUSD.

Of course we can just keep the story simple and say, the EURUSD did not move because it could not get out of it's own way, there were no committed sellers or buyers or technical levels were not taken out.