The US inflation data came out mixed; core CPI in July decreased from 4.8% YoY to 4.7% YoY, while overall CPI rose from 3.0% YoY to 3.2% YoY. If we overlook the issues with rising housing and energy prices, the indicators can be seen as neutral, which was reflected in the initial market reaction – the dollar was speculatively sold against this neutral backdrop. A bit later, Federal Reserve officials – P. Harker, S. Collins, and R. Bostic – almost declared victory over inflation, but the dollar was also speculatively bought back.
The reasons were deeply rooted in the markets; yields on US government bonds jumped significantly (from 4.14% to 4.23% for 5-year bonds), and the rise in unemployment claims (248,000 versus 227,000 previously) heightened concerns about recession in Germany, China, the UK, and the US itself. And, as recent history shows, news about the spread of new COVID-19 variants can have far-reaching consequences.
But will the euro be able to overcome the immediate resistance level at 1.1012 and move higher? From a purely technical standpoint, the price needs to consolidate below this level or below 1.1048, which is slightly below yesterday’s peak. The primary momentum is exhausted, and the price needs to gather strength to consolidate above 1.1048. Support for the expected consolidation lies at the level of 1.0924 – breaching this level opens up the next target at 1.0865.
On the four-hour chart, even after the dip, the price managed to stay above the balance and MACD indicator lines, and the Marlin oscillator remained in the positive territory. We expect it to consolidate with the prospect of short-term growth (to 1.1175).
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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