After Federal Reserve Chairman Jerome Powell made it clear that there would be no four refinancing rate hikes, and no more than three would be needed, the speculative hype switched from the number of increases to the timing of the start of interest rate increases. Immediately, rumors began to appear that the Fed would still violate the previously announced plans, and instead of April, the first rate hike would occur in January. Naturally, due to the incredible growth of inflation. But if the human factor decides everything in the matter of the number of increases, then in the case of deadlines, the statistics themselves bury all these insinuations in the bud. Of course, inflation has increased, but only to 7.0%, while all assumptions about the timing of interest rate hikes were based on an increase to 7.1%. The difference doesn't seem to be significant, but still significant. After all, it turns out that inflation is growing more slowly than the US central bank itself expects. Therefore, the Fed simply has no reason to rush. And if interest rates will remain unchanged in the near future, then there seems to be no reason for the dollar to grow. Moreover, due to all kinds of insinuations, market participants were pretty screwed up, and they were waiting for a slightly different development of events.
Inflation (United States):
But the European data on industrial production remained without any attention. Although they are simply terrifying. The growth rate of industrial production was expected to slow down from 3.3% to 0.8%. As you can see, the forecasts were already extremely negative. But the previous data were revised for the worse, as much as 0.2%. At the same time, instead of growth, the industry showed a decrease of -1.5%. And this is on an annual basis. In other words, the European industry, which has not been able to recover after the collapse of 2020, is not only not growing, it continues to decline. Apparently, this is the result of the energy crisis that has covered the eurozone, which is only now reflected in statistics. And by and large, there are really no reasons for the growth of the single European currency.
Industrial production (Europe):
But from all that has happened, one simple conclusion can be drawn - at the moment the market is moving only under the influence of factors directly related to the United States. Whether it's some kind of statements or statistics. Everything else has no meaning for the market. And just today, data on applications for unemployment benefits are being published, the number of which should increase somewhat. Thus, the number of initial requests may increase by 8,000. While repeated requests should increase by 6,000. And although the growth seems quite insignificant, the fact of the increase in the number of applications is important. This will be perceived by the market as an exceptionally negative factor, significantly reducing the appeal of the US currency. So the single European currency, which does not suffer due to obvious overbought, can further strengthen its position.
Number of repeated applications for unemployment benefits (United States):
The data on producer prices will have little effect today, despite the fact that their growth rates should accelerate from 9.6% to 9.8%. After yesterday's inflation data, it doesn't matter anymore. Although it indicates the potential for further growth in consumer prices. However, this will not affect the timing and pace of the increase in the refinancing rate, because the Fed already proceeds from the assumption that inflation will begin to slow down towards the end of this year.
Producer Price Index (United States):
The EURUSD currency pair for the first time in 1.5 months went out of the flat borders, keeping the quote above the reference level 1.1400. This move was accompanied by high speculative interest, which led to a jump in the euro by 90 points.
The RSI technical instrument reached 74.15 in the four-hour period, which has not happened in the market since May 2021. A high level of overbought caused by a sharp change in prices may well lead to a technical pullback, while speculative interest in the euro will remain in the market.
From the point of view of the Alligator indicator, there is an attempt to change trading interests. This signal will be confirmed only after keeping all MA lines above 1.1400.
On the daily chart, the flat was replaced by a correction in relation to the downward trend.
Expectations and prospects:
Stagnation in the form of consolidation signals a high degree of uncertainty among market participants, where the overbought status of the euro indicates the possibility of a technical pullback. At the same time, the upward momentum relative to the passed flat, on the contrary, indicates the possibility of its prolongation.
In this situation, the starting point is the consolidation of 1.1435/1.1452. So, keeping the price outside of one or another boundary of stagnation will indicate the local course of the price, revealing the scenario of a technical rollout, or a prolongation of momentum.
Comprehensive indicator analysis gives a buy signal based on short-term and intraday periods due to the breakdown of the upper border of the flat.
*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.
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