Inflation in the United States of course slowed down, but not to 8.1%, but to 8.3%. At the same time, in monthly terms, it increased by 0.1%, while it was expected to decline by 0.2%. In addition, the core inflation rate, instead of remaining unchanged, accelerated from 5.9% to 6.3%. Monthly data on the core inflation rate showed an increase of 0.6%, while the forecast was 0.4%. After that, everyone immediately started talking about the fact that in just a week the Federal Reserve would raise the refinancing rate by 100 basis points. And the single currency literally fell below parity in the blink of an eye.
Inflation (United States):
The situation is aggravated by the fact that until next Wednesday, when the meeting of the Federal Open Market Committee takes place, representatives of the Fed will not make any official statements. They can't even comment on the situation with inflation. Internal rules forbid it. In other words, market participants will be able to focus only on macroeconomic statistics and its interpretation by various media. Data on producer prices will be released today, the growth rate of which seems to be slowing down from 9.8% to 8.9%. If these forecasts are confirmed, then it will be possible to assume that inflation will still gradually slow down, and then a rebound is possible, and the euro's return above parity. But if the producer price index declines even a little less, then the market will panic again, and the dollar will further strengthen its positions.
Producer Price Index (United States):
The EURUSD currency pair fell over 200 points in the course of speculative operations during the past day. This movement led to the return of quotes below the parity level.
Technical instruments RSI H1 during the intensive weakening of the local euro fell below 22. This signal indicated a high level of oversold in short-term time periods. RSI H4 and D1 are moving in the lower area of the 30/50 indicator, which corresponds to a downward trend.
The MA moving lines on Alligator H4 changed direction from top to bottom, this was caused by sharp price changes a day earlier.
Expectations and prospects
The overheating of euro short positions led to a technical rollback, which is considered a common phenomenon in the market in case of inertial movement. A gradual recovery of the euro exchange rate is possible, but only in case prices are stable above the parity level. Under this scenario, growth in the direction of 1.0050-1.0120 is possible.
An alternative scenario for the development of the market considers the continuation of the downward cycle, in which the technical signal of oversold will be ignored by traders. In this case, keeping the price below 0.9950 will eventually lead to a new low of the downward trend.
Comprehensive indicator analysis in the short-term and intraday periods indicate a downward cycle, due to the inertial price movement. In the medium term, technical instruments have a sell signal, which corresponds to a downward trend.