- EUR/USD bears are holding the clock and watching 0.9950s.
- The US dollar is firmer on hawkish sentiment around the Fed.
EUR/USD it printed a new New York midday low near 0.9973 and fell from a high of 1.0187 the day after the US inflation data. At the time of writing, the price is trading nearly 1.4% down on the day with eyes on 0.9950s.
Consumer prices slightly beat expectations, with core inflation rising amid rising rent and health care costs, according to a Labor Department report. ”The core index also significantly beat expectations thanks to relentless shelter price inflation, which rose a robust 0.6% month-on-month. The year-over-year change in overall CPI fell to a four-month low of 8.3%, but prices in the core index accelerated to a five-month high of 6.3% year-over-year,” analysts at TD Securities explained.
”In our view, the August CPI report supports the Fed’s continued aggressive efforts to reduce its inflation-adjusted policy.”
”We now expect the FOMC to raise the target rate by 75bp at its meeting next week, followed by another 75bp increase in November and another 50bp increase in December. We now also expect a higher terminal rate spread of 4.25-4.50% by the end of the year.”
Meanwhile, Nomura analysts said on Tuesday that the Fed was likely to raise its short-term interest rate target by a full percentage point at its meeting next week as inflation risks emerged. The Federal Reserve will release its policy decision at the conclusion of its two-day meeting next week, 20-21. September.
Nomura predicted that the US central bank will raise the target Fed funds rate by 50 basis points at both the November and December meetings. The Fed funds target is currently 2.25%-2.50%, following the Fed’s 75 basis point hike in July.
EUR/USD Technical Analysis
According to the previous analysis, EUR/USD Price Analysis: Sees a decline to 0.9950 on break of trend line supportt stated that the weekly chart showed that the price corrected into the neckline of the M-formation with room for a deeper correction towards the 61.8% ratio:
The price was rejected at 61.8% and now a move lower to 0.9950s is expected on the hourly chart: