The EUR/USD currency pair is trading at two-month highs around 1.1450, as the bears on the US Dollar take a respite amid a deteriorating mood.
ECB members remain optimistic despite the country’s economic troubles, citing a combination of reservations over inflation and political stability. A plethora of ECB and Fed officials are scheduled to speak in conjunction with the US Producer Price Index release.
An Examination Of The Technical Aspects
EUR/USD CHART Source: Tradingview.com
In the early hours of Thursday, the Relative Strength Index (RSI) signal on the four-hour graph reached a record high since August, hovering above 80.
The previous time the RSI reached that level, the pair saw a technical pullback that saw it lose roughly 60 pips before recovering its footing again.
Interim support appears to have developed at 1.1440 for the duo before 1.1400 (on a psychological level) and at 1.1380 for the duo after 1.1400 (on a technical level) (former resistance).
As long as these foundations remain in place, purchasers may continue to be interested in the shared currency.
On the upside, the psychological level of 1.1500 serves as the first resistance level until 1.1530 (the static level).
Review Of The Fundamentals
The Euro/Dollar has taken advantage of broad-based selling pressure around the Dollar and risen to its highest level since November 11, near 1.1480, where it is now trading.
Considering the near-term technical picture, the pair is likely to have a technical pullback before attempting fresh multi-month highs.
Following the publication of statistics from the United States Bureau of Labor Statistics revealing that the Consumer Price Index (CPI) increased by 7% on an annual basis in December, the Dollar suffered significant losses versus its major counterparts.
Investors may have seen the CPI print as a reason that’d allow the Fed to be more patient in its approach to balance sheet decrease, despite the print being in line with expectations in the market.
Nonetheless, despite the drop in the value of the Dollar on Wednesday, the yield on US Treasury bonds remained largely stable.
Moreover, according to the CME Group’s FedWatch Tool, markets are still pricing in a 75% possibility of a rate hike in March, indicating that the US Dollar Index may be on the verge of setting a new low shortly.
The Producer Price Index (PPI) data for the United States will be released later in the session and will be included in the economic docket.
The market consensus predicted an annual PPI figure of 9.8% for December this year. A print that exceeds expectations might aid the Dollar’s ability to maintain its competitiveness versus its rivals.
On the other hand, a decrease in the PPI might pave the way for a greater weakening of the Dollar in the future.
In contrast, Federal Reserve Governor Lael Brainard will go before the Senate Banking Committee on Thursday for her confirmation hearing to become the Fed’s Vice Chairman of the Board of Governors.
It appears from Brainard’s written statements, which were made public on Wednesday, that she would restate that the Fed’s most important goal will be to keep inflation under tight control.