U.S. Factory Workers. Image source: WolfVision GmbH, flickr.com
The EURUSD continues to consolidate in the short term even as the PPI change for November was bigger than expected. This is happening just one day before FED's highly anticipated policy meeting. Read more about EURUSD's consolidation from our newest analysis.
Producer inflation surged in November, beating the market forecasts. This is happening primarily because of the persisting supply bottlenecks, which have driven inflation higher since summer. The news did not have an immediately noticeable reflection on the greenback as the EURUSD continues to consolidate.
EURUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the 4H chart above, the price action has been consolidating within a massive Pennant over the last couple of weeks. The bottleneck of the pattern can be found between the 38.2 per cent Fibonacci retracement level at 1.13091 and the 61.8 per cent Fibonacci at 1.12623.
The bottleneck is becoming increasingly narrower, though there is still spare capacity for consolidation in the near future. That is why traders should not expect an immediate breakout or breakdown outside of the pattern. Instead, the price action is likely to remain concentrated around the 38.2 per cent Fibonacci in the near future.
A possible decisive breakout above 1.13091 and the upper limit of the Pennant could be followed by another test of the 23.6 per cent Fibonacci at 1.13381. Conversely, a decisive breakdown below the Pennant could then be followed by a dropdown towards the previous swing low at 1.11900.
Producer prices increased in November
U.S. MoM PPI Change. Image source: TradingEconomics.com
According to the findings of the Bureau of Labour Statistics (BLS), producer prices in the U.S. surged by 0.8 per cent in November, rising moderately from the 0.6 per cent that was recorded a month prior.
In comparison, the consensus forecasts were anticipating a minor contraction in the PPI to 0.5 per cent, which would have been the lowest reading since the beginning of the year.
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