On Thursday, U.S. inflation edged higher compared to the prior month but remained below expectations. At 3.2% for July, the inflation rate picked up steam by 20 basis points compared to June, while the core inflation shed 10 basis points in welcome developments for the Federal Reserve. The EURUSD currency pair maintained its trajectory without massive swings following the inflation reading.
Next week, traders anticipate preliminary data on the Euro Area’s GDP Growth as they determine whether the region will potentially avoid a recession this year. In addition, the Euro Area Inflation rate will be keenly eyed as the market ascertains whether the European Central Bank is poised to hike rates further.
Technical
Following a swift reversal from the 1.12757 level, which forms the EURUSD currency pair’s resistance, the pair has remained buoyed slightly above the support level of 1.08392. The pair has come in contact with its 100-day moving average from the downside, suggesting a shift from a downtrend could be oncoming. An ascending channel, represented by higher lows and higher highs, has unfolded near the Golden Ratio of the major swing levels between the support and resistance.
Given that the price action reacted to the upper trendline of the ascending channel, downside momentum could be at play. The next point of interest to the downside will likely be the minor support level at the 1.09289 level, which coincides with the swing low formed within the ascending channel. In contrast, if downside momentum falters, the next level of significance to the upside will likely be the 1.10595 level corresponding with the 50% Fibonacci Retracement level.
Summary
The only remaining key event for the week will be the U.S. PPI for July, which is expected to speed up by 10 basis points. Given that the PPI does not exceed expectations by a wide margin, the Euro could remain buoyed against the Greenback, leaving the 1.10595 level probable. However, if PPI exceeds expectations, the Greenback could be bolstered by the possibility of further rate hikes in the U.S., making the 1.09289 level likely.
Sources: U.S. Bureau of Labor Statistics, Reuters, TradingView
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