Piece written by Alexa Smith, Trive Financial Market Analyst
The EURUSD currency pair registered modest gains amidst US inflation figures. Headline inflation saw an upward tick to 3.2%, slightly below the projected 3.3%, while core inflation experienced a marginal 0.1% slide, settling at 4.7%. The concurrent rise in headline inflation and steady core inflation reflects overall subdued inflationary pressures.
Nonetheless, the Federal Reserve injects uncertainty, affirming the continued consideration of further interest rate hikes in 2023. This decision stems from fragile labour market data and a slight uptick in headline inflation. Additionally, in light of yesterday’s increase in Initial Jobless Claims climbing from 227K to 248K, coupled with the possible softening of Michigan Consumer Sentiment, prospects of a Fed hike garner credence.
Technical
The EURUSD currency pair topped the 50-day moving average after US inflation data softened; however, a pullback took the price action within reach of the 1.10001 resistance at the 23.60% Fibonacci level. Since supply and demand are in contention and the price action remains above the 50-day moving average, the currency pair may be encouraged to retest the 1.10530 resistance at the 38.20% Fibonacci level. If the price action breaches this resistance, the 1.11384 resistance at the Golden Ratio may mark a pivot point for an upward trend.
However, the 1.10001 resistance could hold, encouraging a potential leg down towards the 1.09147 support, where a move below the 50-day moving average may further encourage a pullback towards the 1.09147 support. If a breakdown of the 1.09147 support occurs, the currency pair may be encouraged to retest the 1.08383 major support.
Summary
The EURUSD currency pair ticked up after the release of US inflation data yesterday, which may encourage the price action to retest the 1.10530 resistance if a breakout of the 1.10001 resistance occurs. However, the Fed’s future interest rate path could introduce uncertainty, encouraging a possible leg down towards the 1.09147 support.
Sources: TradingView, CNBC, Bloomberg
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