As soon as the report showed that the inflation rate in the US eased to 5.3% in August from 5.4% in the previous months, the euro moved rapidly upwards. This was quite surprising since such a slow pace of inflation is actually positive for the US dollar while accelerated inflation poses a threat to economic recovery. However, it soon became clear that the rise of the euro was of speculative nature: in just half an hour, the single European currency developed a rapid decline. So, eventually, everything fell into place.
Inflation rate (United States):
Today, markets expect the data on industrial production in the EU. The indicator is estimated to fall from 9.7% to 6.2%. However, these are annual figures that still seem to be under the influence of the low base effect. Therefore, this data is not really informative. On a monthly basis, industrial production is forecast to increase by 0.5%. This means that monthly and annual data will counterbalance each other, and the market will stay at the current levels. Usually, the report on industrial production has a minor influence on market participants.
Industrial production (Eurozone):
The same is true for the United States where industrial production is projected to slow to 5.0% from 6.6%. At the same time, the indicator may go up by 0.5% on a monthly basis. This report is also likely to have little impact on the market. Therefore, the pair will most probably consolidate near the levels from yesterday.
Industrial production (United States):
A bounce from the pivot point of 1.1770 returned the pair to the local low of Sept. 10 at 1.1850. This is where traders reduced the volume of long positions which resulted in a trend reversal towards the support at 1.1800.
The RSI did not react to market activity and was moving along the line of 50.
On the daily chart, traders are staying within a downtrend that was formed in early June. All future fluctuations of the price take place within this channel.
Outlook
The level of 1.1800 serves as support and holds back the bearish pressure on the euro. If the price settles below 1.1790 on the 4-hour chart, this will trigger a rise in the volume of short positions. As a result, the pair will gradually decline towards the area of 1.1770–1.1700. An alternative scenario will be possible if the price holds firmly above 1.1850 on the 4-hour time frame. This will cancel the downward movement and may lead to a trend reversal.
Comprehensive indicator analysis confirms a sell signal on the intraday and short-term charts as there was a rebound of the price from the local low of Sept. 10. In the medium term, technical analysis confirms sell signals and indicates the continuation of the downward movement towards the resistance area of 1.1880/1.1905.
InstaForex Group