US Inflation Rate
Recent data unveiled that US inflation remained unchanged. It is a really positive factor amid the mounting concerns about the growth in consumer prices worldwide. Although US inflation is still at the highest level since 2008, it is very important that it has stopped climbing.
That is why most analysts had expected a decline in the euro, but it showed an increase. The fact is that the single currency is significantly oversold and it needs stronger reasons to continue falling, for example, a drop in inflation. Notably, the euro only inched up and the overall market situation remained the same.
Today, the eurozone will disclose its industrial production figures. The indicator’s growth is expected to slacken to 10.9% from 20.5%. From the first sight, it looks like a slump in industrial production. However, on a monthly basis, the indicator showed a zero rise. In other words, statistical data is still under the influence of the low base effect, which distorts figures.
Eurozone Industrial Production
At the same time, the US unemployment claims data is likely to attract traders’ attention. The number of the first-time claims may decline by 20 thousand, whereas the number of continuing claims may shrink by 80 thousand. It means that the labor market situation is confidently improving.
Notably, the recent report provided by the US Labor Department unveiled an unprecedented drop in the US unemployment rate. The labor market condition is a much more important indicator of economic stability than inflation. All this points to the fact that the euro may resume losing value.
However, the producer price index data may slightly ameliorate the state of affairs as it may advance to 7.5% from 7.3%. Although a jump in producer prices will lead to inflation growth, it will hardly be significant. Against this background the euro may inch down.
The euro/dollar pair decreased to the lowest level logged in 2021. The level of 1.1704 acted as support and led to a drop in the volume of short positions. As a result, the pair stagnated and then rebounded. The RSI technical indicator proved the reversal signal. It broke the level of 30 and jumped above 40.
Outlook for EUR/USD
Climbing from the level of 1.1704, the pair hit the first Fibonacci retracement level of 23.6% located at 1.1750. After that, the price stopped. If the price consolidates above 1.1770, it may continue climbing to such Fibonacci retracement levels as 38.2% and 61.8%. A downward movement will take place, only if the price bounces from the 23.6% Fibonacci level. This may lead to a drop to 1.1704.