By JustMarkets
New inflation data will be released in the US today. The Consumer Price Index is expected to fall from 6.5% to 6.3% year-over-year, while basic inflation (excluding food and energy prices) will also decrease from 5.7% to 5.4%. If the actual data matches, or at least is no worse, the dollar index will probably start to lose ground, as falling inflation would indicate that the US Fed is on the right track and the high probability of a “soft” economic landing. But if inflation turns out to be hotter, especially the core index, it will give confidence to the dollar on the back of the fact that the US Fed will not stop and continue to raise interest rates.
The trend on the EUR/USD currency pair on the hourly time frame is bearish. The price is forming a wide corridor, and volatility in anticipation of CPI data is reducing. The MACD indicator has become positive, but buying pressure is weak. Under such market conditions, buy trades are best considered from the support level of 1.0651 or after the breakout of the 1.0739 resistance level, but with confirmation in the form of impulse movement. Sell deals can be considered from the resistance level of 1.0739, but better with confirmation in the form of a reverse initiative on the lower time frames.
Alternative scenario: if the price breaks down through the resistance level of 1.0926 and fixes above it, the uptrend will likely resume.
Important labor market data will be released today in Great Britain. The unemployment rate is projected to be unchanged, with jobless claims up slightly. Such data is likely to cause a less aggressive reaction from the Bank of England (BoE) at the expense of easing inflationary pressure in the services sector. Traders need to understand that a strong labor market does not benefit the central bank in raising rates, as rising wages fuel inflationary indicators.
From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. At the moment, the price is trading above the moving averages, and there is a slight buying pressure inside the day. The MACD indicator has turned positive. Under such market conditions, buy trades are better to look for on intraday time frames from the support level of 1.2078, but with confirmation in the form of initiative and short targets. Sell trades are best sought after a pullback from the resistance level of 1.2150 or 1.2203, but also better with confirmation in the form of a reverse initiative or a false breakout.
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Alternative scenario: if the price breaks out through the 1.2416 resistance level and fixes above it, the uptrend will likely resume.
The new Governor of the Bank of Japan (BoJ) will be announced today, and Kazuo Ueda is expected to be endorsed by the government. His attitude to monetary policy is somewhat unclear. During his tenure as representative of the Bank of Japan board from 1998 to 2005, Ueda played a key role in introducing new monetary policy easing tools to combat the domestic banking crisis and ease deflation. Analysts believe that Kazuo Ueda is likely to be in no rush to revise the ultra-soft policy and instead let economic data determine the future outcome, especially inflation and wage data.
From the technical point of view, the medium-term trend on the currency pair USD/JPY is bullish. The price is forming a wide-volatile corridor. At the same time, at the level of 132.89, a double top has been formed. The MACD indicator has become inactive. Under such market conditions, it is worth expecting the price to rise above 132.89 to test the liquidity above the level. Most likely, it will happen at the publication of today’s CPI. Buy trades are best to look for from the support level of 131.46, but only with confirmation on the lower time frames. Sell deals can be searched for from the resistance level of 132.89, but only after a false breakout.
Alternative scenario: If the price fixes below the support level of 128.16, the downtrend will be renewed with a high probability.
The Canadian dollar is a commodity currency, so it is highly dependent on instruments such as the dollar index and oil. Concerns about another hot US inflation figure have led to speculation that the Federal Reserve may have to be more hawkish than previously thought. Any rally in the US currency would put pressure on commodities, led by oil. The dollar index will get fundamental support if today’s US inflation data is worse than forecast and vice versa.
From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price has corrected to the “discount” market area, where traders can look for good buying points. The MACD indicator is in the negative zone, and there are signs of divergence. Buy trades can be considered from the support of 1.3333, but with additional confirmation in the form of impulse initiative on the lower time frames. Sell deals should be considered from the resistance level of 1.3416 but on the condition of a reverse reaction.
Alternative scenario: if the price breaks down and consolidates below the support level of 1.3263, the downtrend will likely resume.
By JustMarkets
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
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