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Lack of Prerequisites for the Strengthening of EURUSD

1/19/2023 12:20 PM

Against the decline in inflation in the euro area, the EUR/USD pair maintains a neutral trend, trading around 1.0800.

According to yesterday's report, the EU consumer price index in December lost 0.4%, which exceeded the forecast value of –0.3% and weakened the annual rate to 9.2% from 10.1% earlier. Positive dynamics are observed for the third month in a row, confirming the effectiveness of the European Central Bank (ECB) measures. Core inflation, which excludes fuel and food prices, rose by 0.6% MoM and from 5.0% to 5.2% YoY, a worrisome signal reflecting a slowdown in economic growth.

The US dollar is trading steadily around 102.000 in the USD Index. Investor's reaction to yesterday's retail sales report was restrained, as the market was already ready for negative dynamics. Thus, the indicator for December lost 1.1% after falling by 1.0% in November, against which the producer price index corrected by –0.5% after rising by 0.2% a month earlier. It led to a slowdown in annual growth to 6.2% from 7.3% earlier and was the most dynamic monthly decline since August last year.

On the daily chart, the trading instrument is correcting towards the resistance line of the ascending corridor.

Technical indicators hold a global buy signal: fast EMAs on the Alligator indicator are above the signal line, and the AO oscillator histogram forms upward bars in the buying zone.

Resistance levels: 1.0870, 1.1070. | Support levels: 1.0710, 1.0510.

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