EUR/USD Signal ahead of key US inflation data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Jan 12, 2022
  • The EUR/USD pair has been in a tight range in the past few weeks.
  • Jerome Powell confirmed that the Fed will be more hawkish this year.
  • We explain what to expect ahead of US inflation data.

The EUR/USD pair moved sideways as investors reflected on this week’s testimony by Jerome Powell and the upcoming American consumer and producer inflation data. It is trading at 1.1363, which is a few pips below its intraday high of 1.1380.

US inflation data

The EUR/USD pair tilted higher on Tuesday evening even after Jerome Powell delivered a relatively hawkish statement. When testifying in a Senate committee, the Fed chair said that the bank will likely accelerate rate hikes if inflation keeps rising. 

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The next major mover for the EUR/USD pair will be the upcoming US consumer inflation data that will come out during the American session.

Economists polled by Reuters expect the data to show that the American inflation jumped from 6.8% in November to 7.0% in December. That will be the highest figure ever released in 40 years.

At the same time, analysts expect that the core CPI, which excludes the volatile food and energy prices, rose from 4.8% to 5.4%. 

The CPI numbers will come a day ahead of the latest US producer price index (PPI) data. The numbers are expected to reveal that the factory-gate prices rose from 9.6% to 9.8% while core PPI rose from 7.7% to 8.0%. 

While inflation has jumped recently, there are signs that it has started to ease. Earlier on Wednesday, data from China showed that the headline consumer price index fell from 2.3% to 1.8%. PPI fell from 12.9% to 10.3%. These numbers are important because China is the source of most goods sold in the United States.

EUR/USD forecast

EUR/USD

The three-hour chart shows that the EUR/USD pair has been in a tight range in the past few weeks. And on Tuesday, the pair managed to test the key resistance level at 1.1360, where it struggled moving several times before. 

The pair is slightly below the 38.2% Fibonacci retracement level and is above the 25-day and 50-day moving averages. 

Therefore, there is a likelihood that the pair will resume the bearish trend as bears target the lower side of the horizontal channel. This view will be invalidated if the price moves above 1.1400.

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