Producer prices in the United States declined after the inflation data was released.Their growth rate accelerated from 8.3% to 8.6%. It was slightly higher than the forecast of 8.5%. Concerning the producer price index as a leading indicator for inflation, its rise means that the rate of consumer price growth will definitely not slow down at least in the near term. On the contrary, inflation may increase. Moreover, the Federal Reserve System will definitely announce the beginning of its quantitative easing program tapering in November. Actually, it was highly probable after the inflation data was released. However, market participants hoped that the decision would be postponed at least till December.
The producer price index was significant, and the dollar stopped weakening. However, the market is obviously inclined to further dollar weakening. Besides, the unemployment claims data released much better than expected, resulting in the inevitability of the Fed's monetary policy tightening. Consequently, the number of initial claims went down by 36,000 while it was forecasted 14,000. The number of repeated claims, which was expected to reduce by 78,000, dropped by 134,000. Besides, the dollar was expected to surge. However, it did not occur. In fact, only temporary weakening of the dollar is mentioned.
Producer Price Index (United States):
However, the dollar will continue to weaken today. Retail sales, which are due to slow from 15.1% to 9.0% are the reason. We still mention year-on-year rising sales, while month-to-month sales may be down 0.1%. It is not relevant, though a decline is indicated concerning high inflation. Consequently, it is a typical situation with rising prices and falling consumer activity. This combination has always been considered extremely negative. Besides, it is not a stimulus to the dollar strengthening.
Retail Sales (United States):
The GBP/USD currency pair reached the local maximum of September 23 during the corrective movement. This resulted in the reduction in the volume of long positions and caused a rebound to the upper boundary of the previously passed flat.
Technical instrument RSI in the four-hour period reached the overbought level of 70, due to the corrective movement. This may indicate a price reversal signal in the future.
In terms of Fibonacci lines, the area of the local high of September 23 coincides with the level of 38.2. This increases the pressure on long positions.
Despite the corrective move, the market still maintains the downward cycle from early June.
Expectations and prospects:
It can be assumed that the area of local high at 1.3730/1.3750 together with Fibo level of 38.2 will continue to put pressure on buyers. This may lead to a slowdown and possibly the completion of the corrective move.
Complex indicator analysis has a signal to sell relative to the one-minute interval due to the price rebound. Indicators of technical tools on the intraday period are focused on the correction, signaling a buy.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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