EUR/USD Extends Thursday’s Post-US CPI Surge Above Key Resistance


Soft Inflation

The US Fed hiked rates by another 75 basis points last week, to 3.50-3.75%, running its most aggressive cycle in at least three decades in order to bring inflation down. It hinted a slower pace at some point, but also ruled out any pause and Chair Powell talked of a potentially higher terminal rate that previously projected. [1]

Inflation is the main driver for the central bank's actions and as such, Wednesday's US CPI inflation update, was eagerly anticipated. The report showed that October's CPI inflation was below forecasts and the previous reading.

The Headline Consumer Price Index (CPI) eased to 7.7% year over-year, from 8.2% prior. This was the first sub-8% print since February. Core CPI, which excludes food and energy prices, moderated to 6.3% year-over-year, from 6.36% in September.

Fed Reaction

Wednesday's data are encouraging since they showed a significant dent in inflation, and make the case for a smaller rate hike by the Fed. However, we have seen good prints before, while Fed officials have been clear that one or two data points are not enough for a policy shift. Furthermore, they will have the chance to examine two more inflation reports before their next meeting in mid-December.

Reacting to the report, Ms Mester (voter) acknowledged "some easing" in inflation, but said that it "continues to be broad-based", reiterating her view of that the bigger risk comes from tightening too little [1]. Mr Harker on the other hand - who will be a voter in 2023 - was less hawkish, saying that he could pause at around 4.5%, according to Reuters. [2]

Market Reaction

The soft CPI report sparked big moves in FX, stock and bond markets, as it shifted expectations around the Fed's tightening path, to a less hawkish direction. The USDOLLAR slumped, while Wall Street had its best day of the year.

CME's FedWatch Tool now prices in a more tame 50 bps increase in December, as far more likely than a 75 bps move. It also assigns the highest probability to rates peaking at 5.00%, from 5.25% previously.[3]

EUR/USD Analysis

The pair runs its second profitable month, helped by the ECB's aggressive rate hike cycle and the recent deflation of the greenback. Yesterday's report fueled a surge that led to one the best days of 2022 and extends its gains today, eying the 200Day's EMA (at around 1.0390).

Furthermore, it now trades above critical the 23.6% Fibonacci of the 2021 High/2022 Lows decline, which can open the door to a broader recovery towards, the 38.2% level at 1.0609.

On the other hand, EUR/USD has found it difficult to stay above parity recently and the Relative Strength Index already points to overbought conditions, which can contain the advance. As such, we can see renewed pressure back towards this region, but there is a strong cluster of support below it (0.9900-0.9729).

Caution is needed though, as markets continue to look for peak in inflation and a Fed pivot, but such expectations have been disappointed before.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.



Retrieved 11 Nov 2022


Retrieved 11 Nov 2022


Retrieved 15 Jul 2024

${} / ${getInstrumentData.ticker} /

Exchange: ${}

${} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.