Signs of the US inflation slackening turned out to be short-lived. Now, traders are waiting for proof of the tendency in reports for November and December. They even stopped selling the US dollar ahead of the publication of such reports. Concerns were also caused by announcements made by some representatives of the Federal Reserve. They hinted that the regulator intended to remain stuck to its aggressive approach.
Meanwhile, the eurozone consumer prices continue to rise. In October, inflation reached its peak of 10.6% per annum. This level several times exceeds the ECB’s target of 2%.
Map of the EU
Under such conditions, the ECB will have to raise the key interest rate higher to combat surging inflation. What is more, Christine Lagarde said that the central bank would take radical measures despite the risk of a recession. At the moment, there are no clear forecasts about the next key interest rate hike. Some analysts expect a rise of 75 basis points, whereas others predict a 50-basis-point hike. Notably, there are whispers about tapering the QE program, which may somehow support the euro.

On the chart, we see that the upward cycle of the euro/dollar pair slackened near the resistance level of 1.0500. After that, the pair showed a technical bounce and entered a sideways channel. The channel was formed between the levels of 1.0300 and 1.0500.
Under the current conditions, the quote is likely to hover within the channel. This price movement may lead to a change in the market sentiment, which will cause new speculative price swings.
The main trading strategy is based on a breakout and the price settlement beyond either limit. The upward scenario will become possible if the price consolidates above 1.0500 on the four-hour chart. This will lead to the prolongation of the upward cycle from the low of the downtrend.
Traders will consider a downward scenario if the price settles below 1.0300. In this case, the price is highly likely to return to 1.0150.
Meanwhile, the pound sterling managed to recover after a decline on Thursday. Investors appreciated a new budget formation plan proposed by the government. Jeremy Hunt outlined a £55 billion package of tax rises and spending cuts for the UK. He also noted that the UK economy had already tipped into a recession.

However, investors remained focused on some positive factors. Thus, today, the UK disclosed its retail sales data for October, which was better than anticipated. The indicator increased by 0.6% instead of a rise of 0.3%.

At the beginning of the week, the pound/dollar pair indicated two control levels of 1.1750 and 1.2000. The pair has been hovering between these levels amid the fundamental factors. Although the range is wide, we can say that the pair is stagnant. This, in turn, may lead to an accumulation process.
Against the backdrop, traders may use a rebound strategy. However, it will be better to apply a breakout method. Thus, the strongest buy or sell signal will appear once the price settles beyond either limit on a daily chart.


00:00 Intro
00:53 ECB’S KEY INTEREST RATE
01:35 EUR/USD
03:14 UK RETAIL SALES, M/M
03:34 GBP/USD

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