The next key catalyst for EUR/USD will be the latest Producer Price Index (PPI) data.


Bearish view

  • Sell ​​the EUR/USD pair and set a take-profit at 0.9850.
  • Add a stop-loss at 1.0095.
  • Lead time: 1-2 days.

Bullish view

  • Set a buy-stop at 1.0045 and a take-profit at 1.0135.
  • Add a stop-loss at 0.9950.

The EUR/USD pair fell sharply during the overnight session as the market pondered strong US consumer inflation data. It crashed to a low of 0.9995, which was the lowest level since September 8. The price was also around 2% below the high level this week.

The Fed must remain hawkish

The EUR/USD price resumed its downtrend as the US Dollar made a strong comeback after the latest consumer inflation data. According to the Bureau of Labor Statistics (BLS), the overall consumer price index (CPI) fell from 0.0% in July to 0.1% in August. This increase was better than the median estimate of -0.1%.

On an annual basis, inflation rose to 8.3% in August, which was lower than the previous 8.5%. However, this figure was worse than the median estimate of 8.1%. At the same time, core consumer inflation, which excludes volatility in food and energy prices, rose from 0.3% to 0.6% on a monthly basis. It hit a multi-decade high of 6.3%.

Consequently, the pair fell as investors changed their minds about what the Federal Reserve will do. Prior to the data release, most analysts expected the country’s inflation to decline in August. Additionally, the price of gasoline has fallen from its year-to-date high of $5 to around $3.70. Used cars and even rental prices have started to fall.

As such, analysts believe the Fed will deliver another giant rate hike next week. The bank will also continue its quantitative tightening (QT) process.

The next key catalyst for EUR/USD will be the latest Producer Price Index (PPI) data. Analysts expect the overall PPI to rise from 9.8% in July to 8.8% in August. They also see the core PPI drop from 7.6% to 7.1%. The pair will also react to industrial production data from Europe.

EUR/USD Forecast

The EUR/USD pair has seen a strong uptrend in recent days. It managed to move from last week’s low of 0.9863 to a high of 1.0196. This rebound ended Tuesday after the US inflation data. As it fell, it broke below the important support level at 1.0092, which was the August 26 high.

The pair managed to break below the standard pivot point and the 25 and 50 day moving averages while the Relative Strength Index (RSI) broke below the neutral 50 point. Therefore, the pair will likely continue to decline as it enters the distribution phase. The key support to watch will be at 0.9850.


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