VOT Research Desk
Market Analytics and Considerations
The Euro Area’s headline inflation reaches a historical high.
The 200-day moving average and horizontal resistance are causing EUR/USD to struggle.
Official headline inflation in the Euro Area reached a record high of 10.6% in October, just under the previous projection of 10.7%. Statistics from Eurostat show that in October, the annualized average for energy was 41.5% (increased from 40.7% in September), followed by the annual rates for food, drink, and tobacco at 13.1% (up from 11.8% in September), and non-energy industrial products at 6.1% (rise from 5.5% in September).
As the post-CPI move slows, the current gain in the EUR/USD has come to an end. The yields in the ultra-short end of the US bond market are stable even as market forecasts of a reduction in rate increases rise. The yield on a one-year US Treasury bill is approximately 4.66%, which is more than 250 basis points higher than the yield on a one-year German bond. Any short-term increase in the EUR/USD rate will remain to be constrained by this interest rate differential.
Watch speeches by Fed members Michelle Bowman and Philip Jefferson today at 14:15 & 15:40 GMT, accordingly, for any hints regarding potential changes in US monetary and fiscal policy.
When surging to 1.0480 on Tuesday after the September PPI report revealed producer inflation was decreasing, the EUR/USD exchange rate now hovers around 1.0335. The pair broke over both the 200-day moving average and horizontal resistance at 1.0365 to go higher. Nevertheless, this movement was just temporary, as the spot EUR/USD rate is once again below those. Since the middle of June 2021, the 200-day sma has not been pressured. The pair should be supported by a short-term string of rising lows near 1.0280.
According to data from active investors, 1.29 percent of traders are net long, with the short-to-long ratio at 1.42 to 1. Traders who are net-long are up 7.67% from yesterday and down 14.93% from the previous week, while those who are net-short are up 8.07% from yesterday and up 6.84% from the previous week.
We frequently adopt an opposing stance to the general consensus, and the fact that traders are net short signals that EUR/USD prices may climb in the future. We have a higher EUR/USD-bullish contrarian trading bias as a result of the current attitude and current movements, as traders are more net-short than they were yesterday and last week.
