EUR/USD. April 19. Traders await the final value of inflation in the EU
April 19, 2023 12:22 pm
On Tuesday, the EUR/USD pair reversed in favor of the European currency and showed some growth toward 1.1000. It did not reach this level and has already reversed in favor of the US dollar. The decline has yet to start properly, and the March inflation report for the European Union will be released. The European currency will not be able to show growth today, but the inflation report is important, and the reaction of traders to it may be unpredictable.
The consumer price index for March will be released today in its second estimate. Recall that the first estimate, released two weeks ago, decreased from 8.5% to 6.9% y/y, although traders expected a drop to a maximum of 7.1%. Now forecasts for March have been lowered to 6.9%, and the main question remains whether an even greater drop in inflation will be recorded. If inflation drops even further, bears may go on the offensive again, as the chances of the ECB tightening monetary policy in May by half a percent will be almost zero. ECB members are already pondering how much to raise interest rates. Inflation has slowed down significantly in recent months and will likely continue declining. Thus, the pace of rate hikes can be slowed. For the euro, this means the loss of an important support factor, which has been showing growth in recent weeks and months. Inflation remains the determining factor in the market. Today’s report will be very important, even though it is the second estimate.
In the evening, the FOMC will release a summary of economic reviews by region in the United States. This document rarely contains important information, so today, everything depends on inflation in the European Union.
On the 4-hour chart, the pair consolidated above the sideways corridor, which allows us to expect further growth toward the corrective level of 61.8% (1.1273). Consolidation above the corrective level of 50.0% (1.0941) was also successful, which increases the chances of further growth. The “bullish” divergence at the CCI indicator similarly favored the euro. No new emerging divergences have been observed yet.
The Commitments of Traders (COT) report:
In the last reporting week, speculators opened 18,764 long contracts and closed 1,181 short contracts. The sentiment of major traders remains “bullish” and continues to strengthen overall. The total number of long contracts concentrated in the hands of speculators now amounts to 244,000, while short contracts are at 81,000. The European currency has been growing for more than half a year, but the information background is starting to change, which may lead to a decline in the EU currency. The ECB may reduce the rate hike pace to 0.25% at the next meeting, which could decrease demand for the euro currency. The difference between the number of long and short contracts is threefold, which speaks to the proximity of the moment when bears will activate. For now, strong “bullish” sentiment persists, but I think the situation will begin to change soon.
News calendar for the US and the European Union:
EU – consumer price index (CPI) (09:00 UTC).
US – Federal Reserve’s “Beige Book” (18:00 UTC).
On April 19, the economic events calendar contains two entries, one of which is of minor importance. The influence of the background information on traders’ sentiment today may be of medium strength.
EUR/USD forecast and advice for traders:
New sales of the pair can be opened when bouncing off the 1.1000 level on the hourly chart with a target of 1.0917. Or when closing below 1.0917 with a target of 1.0843. Purchases of the pair were possible when bouncing off the 1.0917 level with a target of 1.1000. Now this deal can be closed.
The material has been provided by InstaForex Company – www.instaforex.com
On Tuesday, the EUR/USD pair reversed in favor of the European currency and showed some growth toward 1.1000. It did not reach this level and has already reversed in favor of the US dollar. The decline has yet to start properly, and the March inflation report for the European Union will be released. The European currency will not be able to show growth today, but the inflation report is important, and the reaction of traders to it may be unpredictable.
The consumer price index for March will be released today in its second estimate. Recall that the first estimate, released two weeks ago, decreased from 8.5% to 6.9% y/y, although traders expected a drop to a maximum of 7.1%. Now forecasts for March have been lowered to 6.9%, and the main question remains whether an even greater drop in inflation will be recorded. If inflation drops even further, bears may go on the offensive again, as the chances of the ECB tightening monetary policy in May by half a percent will be almost zero. ECB members are already pondering how much to raise interest rates. Inflation has slowed down significantly in recent months and will likely continue declining. Thus, the pace of rate hikes can be slowed. For the euro, this means the loss of an important support factor, which has been showing growth in recent weeks and months. Inflation remains the determining factor in the market. Today’s report will be very important, even though it is the second estimate.
In the evening, the FOMC will release a summary of economic reviews by region in the United States. This document rarely contains important information, so today, everything depends on inflation in the European Union.
On the 4-hour chart, the pair consolidated above the sideways corridor, which allows us to expect further growth toward the corrective level of 61.8% (1.1273). Consolidation above the corrective level of 50.0% (1.0941) was also successful, which increases the chances of further growth. The “bullish” divergence at the CCI indicator similarly favored the euro. No new emerging divergences have been observed yet.
The Commitments of Traders (COT) report:
In the last reporting week, speculators opened 18,764 long contracts and closed 1,181 short contracts. The sentiment of major traders remains “bullish” and continues to strengthen overall. The total number of long contracts concentrated in the hands of speculators now amounts to 244,000, while short contracts are at 81,000. The European currency has been growing for more than half a year, but the information background is starting to change, which may lead to a decline in the EU currency. The ECB may reduce the rate hike pace to 0.25% at the next meeting, which could decrease demand for the euro currency. The difference between the number of long and short contracts is threefold, which speaks to the proximity of the moment when bears will activate. For now, strong “bullish” sentiment persists, but I think the situation will begin to change soon.
News calendar for the US and the European Union:
EU – consumer price index (CPI) (09:00 UTC).
US – Federal Reserve’s “Beige Book” (18:00 UTC).
On April 19, the economic events calendar contains two entries, one of which is of minor importance. The influence of the background information on traders’ sentiment today may be of medium strength.
EUR/USD forecast and advice for traders:
New sales of the pair can be opened when bouncing off the 1.1000 level on the hourly chart with a target of 1.0917. Or when closing below 1.0917 with a target of 1.0843. Purchases of the pair were possible when bouncing off the 1.0917 level with a target of 1.1000. Now this deal can be closed.
The material has been provided by InstaForex Company – www.instaforex.com
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