Almost before the close of the American session, the single European currency began to weaken a little. This process continued during the Asian session, and at the moment, we are witnessing a certain lull. All this is nothing more than preparation for the publication of inflation data in the United States. Moreover, all this is very much like a typical movement in the opposite direction from expectations, followed by a jerk in the opposite direction. The fact is that the Federal Reserve System still pretends as if there is no threat of unwinding an inflationary spiral at all. However, as early as last month, inflation accelerated from 1.7% to 2.6%, which casts doubt on the words of the representatives of the Federal Reserve System. Today, this very inflation may accelerate from 2.6% to 3.8%. That is, inflation is growing faster. It is worth recalling here that the target level for inflation is 2.0%. The Federal Reserve System has been claiming for several years that in order to raise interest rates, inflation must approach this very mark, and remain close to it for some time.
Only now inflation has rapidly surpassed this level, and, apparently, continues to grow. This means that the Federal Reserve System has no choice but to urgently raise the refinancing rate in order to curb inflation and prevent economic panic. The only problem is that neither the markets nor the economy is ready for this at this point in time. An unexpected increase in the refinancing rate will cause serious damage to the entire financial world, as it will require an instant revaluation of all collaterals, loans, and the like. The market may experience a sudden collapse, followed by a series of bankruptcies. And not only in the financial sector, but also in the real sector of the economy. However, the Federal Reserve System cannot leave everything as it is, since the growth of inflation can provoke equally destructive consequences. This will first of all be felt by citizens, and not by companies.
In general, the situation is not pleasant. If the Federal Reserve System had warned businesses in advance about inflationary risks, the financial sector would have had time to prepare. However, the regulator continues to ignore what is happening. This is precisely what scares the investors, who are afraid of sudden steps, naturally for the emergency rescue of the economy, by the Federal Reserve System. So, if inflation forecasts are confirmed, then no one will pay attention to the words of representatives of the Federal Reserve System, and a massive sale of the dollar may simply begin. However, this is only if the forecasts are confirmed. If the growth of inflation turns out to be significantly lower, or it even goes down altogether, which of course is extremely unlikely, then the picture will be diametrically opposite.
Inflation (United States):
After an intense upward movement in the period of May 7, the EURUSD currency pair has switched to the accumulation mode, where the price levels 1.2115 / 1.2180 serve as variable amplitude boundaries.
The market dynamics since the beginning of the trading week has shown signs of slowing down, but taking into account the accumulation process, there is an assumption that a new round of acceleration awaits us soon.
If we proceed from the current location of the quote, it can be seen that during the Asian trading session the euro fell to the area of the lower boundary of the amplitude, but the volatility is still at a low level.
Considering the trading chart in general terms, the daily period, it is worth highlighting that, since March, there has been an upward move with a scale of more than 470 points.
In this situation, it can be assumed that price fluctuations within 1.2115 / 1.2180 will still remain in the market. But given the upcoming publication of statistical data on Europe and the United States, speculative interest may arise, which will lead to accelerated volatility. Coordinates 1.2100 / 1.2180 serve as control values, relative to which the largest bursts of activity may occur.
From the point of view of complex indicator analysis, it is clear that the indicators of technical instruments on the minute and hourly intervals have a sell signal due to the downward cycle in the period 19:00 - 06:00 on the trading terminal. The daily period is still focused on the upward price movement.
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