The Euro is Still Rising as the American Dollar Slips After US CPI.

Market Analytics and Considerations

Key Notes

• After the US dollar fell from an in-line CPI, the euro gained momentum.
• The Fed is likely to increase by 25 basis points in February rather than by 50.

After US CPI exceeded expectations from across board, the EUR/USD surged to its top level until April of prior year. A core reading of 6.5percentage points year-on-year through the end of December represented a slowdown, but it was still significantly higher than the Fed’s aim of 2 percent

Following the inflation data, the US dollar fell from across board, and in Asian trading, EUR/USD had another roll.

According to the statistics, the Fed may not have to be as aggressive as they have earlier mentioned. According to a Bloomberg survey of experts, the Fed will increase its inflation target by 25 basis points on Feb 1st. Instead of protecting against a probable 50 bp boost, futures and swaps markets are currently pricing a 25 bp increase.

However, in remarks made tonight, St. Louis Federal Reserve Bank President James Bullard reinforced his aggressive attitude, saying that rates should swiftly rise above 5 percent.

Following the Bank of Japan’s announcement that they will be conducting a review of the success of their ultra-relaxed monetary policy, the underlying deterioration in the greenback became more pronounced in USD/JPY. Market participants are pricing in additional tighter by the reserve bank.

The commodities and development exchange rates found strength due to an increase in risk appetite, with the Australian Dollar and Norwegian Krone benefiting most.

The fact that China’s balance of trade exceeded expectations in Dec, coming in at US$ 78.1 billion, contributed to the optimistic mood. All APAC stocks rose, with the exception of Japan, which fell since of worries over the nation’s monetary policy future.

EUR/USD TECHNICAL EXAMINATION

The EUR/USD has surged over the upper boundary of the Bollinger Band, which is dependent on the 21-day Simple Moving Average to achieve a high of 1.0868 presently.

This could portend the start of a fresh pattern. A brief halt in bullish sentiment or a prospective reversion could be indicated by a closing back within the band.

Technical Indicators

The apex and cutoff of April 2022, 1.0936 and 1.0945, may act as resistance. Support on the decline might well be found at the previous low points at 1.0483 and 1.0443 or at the thresholds of 1.0787 and 1.0777.

Indicators