EUR/USD Steady Ahead of US CPI Inflation

  • EURUSD
    (${instrument.percentChange}%)

EUR/USD – H4

Headline CPI had surged 7% year-over-year in December, while the Core reading was +5.5% - the highest levels since 1982 and 1991 respectively. Investors now brace for the January Consumer Price Index, due at 13:30 GMT, which has the potential to spur volatility and determine the pair's trajectory, while EU Commission's economic forecasts are due shortly (09:00 GMT).

High Inflation is the main driver for the Fed's action and aggressive monetary tightening prospects, as it readies for rates lift-off in March and potentially multiple hikes ahead. The conversation has been shifting towards the size of the moves, with Fed Cleveland President Loretta Mester (voter) not seeing a compelling case for a larger 50 basis in March, based on yesterday's comments, as reported by Reuters. [1]

EUR/USD surged last week after Ms Lagarde did not rule out rate hikes this year, which was a stark change from prior dovish comments, but on Monday she did seem to try to walk that back during her EU Parliament testimony.

The current week started with losses and this creates risk for pressure towards mid-1.1300s, where the EMA200 and the 38.2% Fibonacci of the "January Low/February High" advance are located, but a strong catalyst will be required for a breach that would pause the upside bias.

Above this level, the common currency has the potential to set fresh 2022 highs towards 1.1500, but it does yet inspire confidence for tackling the 200Day EMA at around 1.1570.

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Nikos Tzabouras

Senior Market Specialist

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.

References

1

Retrieved 27 Jun 2022 https://www.reuters.com/world/us/feds-mester-says-she-doesnt-see-compelling-case-start-with-50-bps-rate-hike-2022-02-09/

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