- EUR/USD hits a new yearly high at 1.1495, 5 pips close to 1.1500.
- Market sentiment is mixed due to the higher-than-expected US inflation figure.
- Money market futures show a 71% chance that the US central bank will hike 50bps on the Fed’s Bullard comments.
The EUR/USD has a neutral bullish trend but would need a daily close above the daily high of Feb 7.
Following a higher than expected January US inflation report, EUR/USD is rising in the American session. At the time of writing, the EUR/USD is trading at 1.1476.
The mood in financial markets is mixed after the US Department of Labor revealed that the consumer price index (CPI) rose to 7.5% year-on-year, a level last seen in August 1982. Furthermore, the core CPI, which excluded food and energy, was 6% on an annual figure. Both readings were higher than estimates, further cementing the case for a Fed rate hike at the March meeting.
The CME FEDWATCH tool, a gauge of market players’ expectations of the Federal Funds Rate (FFR), has fully priced in a 25bp hike. Also, there is a 71% chance of a 50bp rise, which looks aggressive as base effects could ease a bit.
However, on March 10, the US economic calendar would feature February’s CPI, which could significantly influence Federal Reserve policy makers to make a more aggressive than expected hike.
At press time, St. Louis Fed President James Bullard said “I’d like to see 100 basis points in the stock by July 1,” as reported by Bloomberg.
Meanwhile, the eurozone economic docket was fairly light, albeit with European Central Bank (ECB) Chief Economist Philip Lane. Lane said that “as the bottlenecks will eventually be resolved, price pressures should ease and inflation would return to trend without the need for a significant tightening of monetary policy.”
In addition, he pointed out that “given that monetary policy directs domestic demand, a tightening of monetary policy in reaction to an external supply shock would mean that the economy would simultaneously face two adverse shocks…”.
EUR/USD Price Forecast: Technical Outlook
On the release of the US CPI figure, EUR/USD initially broke below 1.1400, hitting a daily low around 1.1380, followed by a 120 pip jump near 1.1495, a yearly high. EUR/USD has retraced from the yearly high in the last hour, trading above the daily high of Feb 7, a support level at 1.1464.
That said, the first resistance for the EUR/USD would be 1.1500. The break of the latter would open the door towards the 9th Nov 2021 daily high at 1.1609 and then the 200 DMA at 1.1664.
On the other hand, the February 7 daily high at 1.1464 is the first support level. Once cleared, the next demand zone would be the 100 DMA at 1.1416 and the psychological level at 1.1400.
Technical levels
Source: Fx Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
