- With the start of this week's trading, the price of the euro against the US dollar EUR/USD is moving in a very narrow range amid quiet trading, a calm economic calendar today, and until the reaction to the announcement of US inflation numbers later this week.
- This will have a strong and direct reaction to the future of the US Federal Reserve’s policy.
- According to the platforms of Forex currency trading companies, the price of the Euro/Dollar stabilizes around the level of 1.0775.
In general, the release of the US consumer price index for April next Wednesday is expected to represent the biggest test so far of the rise that began this month when US Federal Reserve Chairman Jerome Powell dispelled fears that the US central bank might raise interest rates again. It gained momentum after the Labor Department reported a slowdown in job growth, sending yields down sharply from last month's peaks.
This progress has raised risks in the upcoming inflation data – which could either extend it or eliminate it as another ominous twist. Accordingly, Also, analysts at Bank of America Corp said that the market will be in a “holding pattern” until then. Previous US CPI reports this year fuelled a sell-off in the bond market, as faster-than-expected readings raised fears that the Federal Reserve's gains against inflation would stall. The most recent, on April 10, caused 10-year Treasury yields to rise by about 18 basis points, the largest single-day move resulting from CPI data since 2002. In all, half of the jump of more than 60 basis points In that index this year happened on the days when the Consumer Price Index was released.
According to analysts: “The market reality now is where we oscillate from data release to data release.” Added, “There appears to be some sort of economic downturn here – but what it will take for this rally to actually continue is an indication from the CPI data that things are not accelerating again, and that we are seeing a decline in inflation.”
Until this month, the data largely emphasized the strength of the US economy, prompting traders to back off widespread bets that the Federal Reserve will cut US interest rates several times this year. So far, this reset has caused investors to incur new losses and sapped conviction about the direction the market is headed.
Moreover, Futures positions indicate that many investors hedged short bets on Treasuries as yields rose last month. Overall, this has been a volatile situation as investors navigate market uncertainty.
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However, bond prices have risen steadily this month thanks to new signs that the economy and Labor market are slowing and will allow the US Federal Reserve to begin easing monetary policy late this year. According to trading, yields on ten-year Treasury bonds fell during all trading sessions in May except for two, where they fell by about 20 basis points to about 4.5%. More broadly, US Treasuries rose about 1.3% through May 9, reversing some of the 2.3% loss in April - the worst in more than a year, according to the Bloomberg index.
According to the results of the economic calendar data, The CPI is expected to show a slowdown in inflation. The core rate — seen as a better measure of underlying pressures, because it excludes volatile food and energy costs — is expected to rise 0.3% in April from the previous month, down from 0.4% in March, according to forecasters surveyed.
The general index is expected to rise by 3.4% over the previous year, compared to an increase of 3.5% in March. Overall, this is still well above the Fed's target rate of 2%. Several US central bank officials have recently confirmed that interest rates may need to remain high for a longer period, with Bank Governor Michelle Bowman saying that the recent pace of inflation indicates that it may not be appropriate for policymakers to cut interest rates in 2024.
However, considering the recent market recovery, traders may view any signs of progress against inflation as a signal to buy. Matthew Luzetti, chief US economist at Deutsche Bank AG, does not expect the Fed to make its first cut before December. But he said: “Investor sentiment is definitely more likely to react in a cautious direction, given the momentum.”
EUR/USD Technical analysis and forecast:
According to the performance on the daily chart, the price of the euro against the US dollar EUR/USD still lacks the strong momentum to complete the rebound upward. It will not succeed in doing so without moving towards the resistance levels of 1.0830 and 1.1000, respectively.
On the other hand, a return to the vicinity of the support levels 1.0700 and 1.0620 will threaten upward attempts and confirm that the bears are ready to move towards the psychological support level 1.0500 soon.
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