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The Euro Retreats From its Record Highs

1/18/2023 10:34 AM

The EUR/USD pair shows a slight decline during the Asian session, building on the corrective momentum formed at the end of last week, when the instrument was holding near the April 2022 highs.

The US dollar is in demand again, but investors indicate that technical factors remain the main drivers for its growth. At the same time, traders expect further softening of the position of the US Federal Reserve regarding the future increase in interest rates. According to current forecasts, the regulator will raise the rate by only 25 basis points during the meeting on February 1, after which it may take a wait-and-see attitude against the background of a noticeable decrease in inflationary pressure. Today, investors are waiting for the publication of December statistics on the Producer Price Index, which may increase the likelihood of such a scenario. Analysts expect the index to slow down from 7.4% to 6.8% on an annualized basis and from 0.3% to -0.1% on a monthly basis.

In the euro area, statistics on consumer inflation will be released today, but analysts' forecasts do not imply any changes compared to November data. It is expected that by the end of December, the Consumer Price Index in the euro area will be 9.2% in annual terms and will decrease by 0.3% in monthly terms.

The EU authorities continue a smooth transition to renewable energy sources, driven by the crisis that developed rapidly after the start of the Russian-Ukrainian military conflict. Thus, the European Internal Market Commissioner, Thierry Breton, said that the countries of the bloc will purchase generating equipment for a total of 350.0 billion euros as part of the European Green Deal program, which involves achieving zero carbon emissions by 2050.

On the D1 chart Bollinger Bands are trying to reverse horisontally. The price range is narrowing, reflecting the emergence of downward dynamics this week. MACD is falling, having formed a relatively strong sell signal (the histogram is below the signal line). Stochastic is showing more stable decline and is located in the middle of its area.

Resistance levels: 1.0800, 1.0850, 1.0900, 1.0957. | Support levels: 1.0759, 1.0700, 1.0657, 1.0600.

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