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EURUSD Market Update

1/12/2023 2:00 PM

This week, the EUR/USD pair has been growing, and currently, the quotes are around 1.0770.

Today, investors are waiting for the main event of the week – the release of December data on US consumer inflation, based on which US Federal Reserve officials will make decisions on monetary policy: the consumer price index may fall from 7.1% to 6.5% YoY, and the core value — from 6.0% to 5.7% against the backdrop of falling prices for gasoline and energy. Combined with the December slowdown in wage growth from 4.8% to 4.6% YoY, it will give the regulator a strong argument in favor of softening the “hawkish” rhetoric: most experts believe that in February, the agency will again slow down the interest rate hike to 25.0 basis points. However, the continuation of the previous rate of increase in the indicator of 50.0 basis points is also not excluded, as the labor market remains quite strong, and the growth in prices for food and services does not stop without giving a guarantee of a stable reduction in inflation indicators, and in these conditions change in the monetary rate looks premature.

The euro is supported by market hopes that the recession in the EU will not be as deep as expected or that it can be avoided altogether. The basis for such optimism is economic statistics: business activity in the region is close to recovery, demand remains stable, and price growth is slowing down.

The trading instrument is trying to consolidate above 1.0742 (Murrey level [8/8]) to continue rising to 1.0890 (Fibonacci correction 50.0%) and 1.0986 (Murrey level [+2/8]). The key “bearish” level is 1.0620 (Murrey level [7/8], the middle line of Bollinger bands, Fibonacci correction 38.2%), consolidation below which will give the prospect of resuming the decline to 1.0376 (Murrey level [3/8]) and 1.0253 (Murrey level [4/8]).

Technical indicators do not rule out the possibility of continued growth: Bollinger bands are directed upwards, the MACD histogram is growing in the positive zone, and Stochastic has entered the overbought zone but is still directed upwards.

Resistance levels: 1.0742, 1.0890, 1.0986. | Support levels: 1.0620, 1.0376, 1.0253.

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