The United States Capitol building in Washington DC. Image source: Wasin Pummarin © 123RF.com
The EURUSD has depreciated considerably over the last few days on the ongoing strengthening of the dollar. Today's inflation data is only likely to bolster the underlying volatility. Check out our last analysis of the pair to get a better sense of the overall market sentiment.
The highly anticipated U.S. inflation data for July was finally published by the Bureau of Labour Statistics (BLS) earlier today. Consumer prices met the consensus forecasts without any significant market surprises. Nevertheless, the report still caused a temporary uptick in volatility on the EURUSD shortly after it was posted.
EURUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the 4H chart above, the price action of the EURUSD remains concentrated within the boundaries of a descending channel. The inflation numbers caused it to momentarily reach the 23.6 per cent Fibonacci retracement level at 1.17537 before reversing back below the 20-day MA (in red).
The MACD indicator registered a minor uptick in bullish momentum, even though the underlying market sentiment remains ostensibly bearish. This can be inferred by the fact that the 50-day MA (in green) is about to cross below the 100-day MA (in blue) in a new descending order.
The price action may continue consolidating just below the 23.6 per cent Fibonacci retracement level in the near future before the broader downtrend can be resumed. This is further bolstered by the fact that this is where the upper boundary of the channel can be found.
Short term inflation pressures finally converging with FED's estimations
According to the findings of the July survey, headline inflation remained unchanged at 5.4 per cent from a month prior, as was expected by the initial forecasts. The Consumer Price Index (CPI) grew by 0.5 per cent over the same period, also meeting the preliminary forecasts but falling below June's 0.9 per cent expansion.
U.S. MoM Inflation Rate. Image source: TradingEconomics.com
The greenback was shaken up by the data because this marked the first instance in five months where short term inflation did not increase. This could give further credence to the expectations for FED tapering of the quantitative easing programme now that inflation is starting to meet FED's longer-term projections.
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