The EUR/USD pair jumped to fresh two-month highs on Thursday after the release of lower-than-expected U.S. consumer inflation figures as it favors the case of a less aggressive Fed at the December meeting.
At the time of writing, the EUR/USD pair is trading at the 1.0130 area, 1.2% above its opening price, after bottoming at a daily low of 0.9935 earlier in the session and having struck its highest level since mid-September at 1.0159.
The U.S. Bureau of Labor Statistics reported October Consumer Price Index figures. Headline CPI inflation advanced 0.4% in October while the annualized rate came at 7.7%, much lower than the market’s expectations of 8% and decelerating from September’s 8.2% reading. Meanwhile, core inflation, which excludes food and energy prices, printed a 0.3% monthly rate while the annual rate came at 6.3%, below the 6.5% expected.
As a reaction, markets are building a stronger case in favor of a 50 bps hike from the Fed at the December meeting. According to WIRP, market participants are currently betting on 80% odds of a half-percentage point hike, while on Wednesday, those probabilities stood at 56%.
The U.S. dollar weakened against most peers, weighed by a strong pullback in Treasury yields across the curve. The DXY index is shedding around 1.3% at the 109.00 area. On Friday, the Federal Statistics Office of Germany will publish the October consumer inflation figures, which can have some additional impact on the shared currency.
From a technical viewpoint, the EUR/USD short-term outlook has improved as its indicators are gaining ground on the daily chart. The RSI stands above its midline and heads north, not giving signs of exhaustion yet, while the MACD printed a higher green bar, indicating that the buyers are in the driver’s seat.
On the upside, having broken above 1.0100, the EUR/USD following resistance levels could be found at the September and August monthly highs of 1.0197 and 1.0368, respectively. On the other hand, short-term supports are seen at the 100- and 20-day SMA at 1.0030 and 0.9907, respectively, ahead of last week's lows at 0.9730.