Market Analysis – EURUSD
The Euro shows a moderate decline against the US Dollar during today’s Asian session, developing a bearish daily candlestick. The decline measures just above 10 pips, but the asset has seen a slight increase over the last two hours as we look to enter the European Session. Looking at the past two weeks we can see the Euro, in general, has declined against the US Dollar, but neither have necessarily had persuasive movements. Over the next two days the market will be closely looking at the fundamental side of analysis, as well as technical, due to the scheduled economic releases.
Investors are taking extreme caution when looking to open new trading positions, and generally when positioning themselves in the market. The reason for this is today’s publication of US inflation statistics, as well as the EU’s Monetary Policy Statement and press conference. If the data released this afternoon again indicates hyperinflation, this could serve as a reason for the US Fed to revise its monetary policy towards tightening as high levels of inflation bears significant risks to the economy as the value of the currency and its purchasing power weakens. A more hawkish stance by Central Banks are generally believed to have one of the most direct effects on the local currency and can support Dollar exchange rates.
The US inflation figures, due to be released, are the CPI and Core CPI figures which are predicted to be released at 0.4% and 0.5%, which are still generally high considering the inflation the economy has experienced this year so far. The figures are much lower than the previous month’s figures of almost 1%, but traders are treading cautiously. If the inflation figures do decrease, this does further support the Federal Reserve’s stance on inflation which has previously been that inflation will not remain high in the longer term, and that the economy will not overheat with temporary high figures. However, if the figures do remain high, the question will be asked whether the monetary policy must be altered, even if it may have adverse effects on the employment sector.
In the European Union there is a similar issue, inflation has reached 2% which is much lower than the 4% reached in the US, but is still considerably high for the region which traditionally has lower inflation rate. Again, investors will be paying attention to today’s Monetary Policy Statement and any comments, or indications which the Central Bank will confirm in the conference thereafter. Generally in the market, opinions are that no changes to the policy is likely or expected, but updated forecasts will be important and can cause strong movements not only with the EURUSD, but Euro pairs across the market. Traders must bear in mind the instrument will be affected by both releases from both sides.
The US Dollar yesterday narrowly escaped a bearish candlestick after the US Dollar increased in value during the US trading session, and this morning is showing a slight increase so far. We can see the US Dollar is declining against the Yen, Pound and Australian Dollar, but is currently showing a slight increase against the Euro and Canadian Dollar, again indicating the lack of decisiveness. Looking at the Euro Currency Index we can see mixed movements. Today we are currently seeing a decline, whereas yesterday saw a strong incline.
Resistance levels: 1.2200, 1.2233, 1.2265, 1.2309.
Support levels: 1.2150, 1.2100, 1.2050, 1.2000.