EUR/USD analysis: US November inflation disappoints, little can do the Fed now
|EUR/USD Current price: 1.1761
US inflation remains subdued, according to November official data.
EUR/USD aims modestly higher, cautious mood prevails.
US November inflation came in not only below expected, but also below its previous reading yearly basis. For the month, inflation rose 0.4%, as expected, while the core reading resulted at 0.1% from the previous 0.2%. When compared to a year earlier, inflation rose 2.2%, matching market's expectations and the previous figure, while the core figure that excludes volatile food and energy prices, resulted at 1.7% missing expectations of 1.8%.
The EUR/USD pair posted a modest advance afterwards, now around its daily high in the 1.1760 region, with gains limited ahead of Fed's announcement, but what can the US Federal Reserve can do now? I mean, they can ´t be any more hawkish that what they have been lately, as inflation is clearly not backing such stance. Of course, policymakers can still believe they will be able to hike rates three times next year, but won't be enough to convince speculative interest.
Indeed, market reaction is unpredictable ahead of the event, but these numbers are not pointing for a strong dollar rally today. Technically the 4 hours chart shows that the price keeps struggling around a 200 SMA an below its 20 and 100 SMAs, as technical indicators turned marginally higher within bearish territory, not enough at this point to suggest further gains ahead. The levels to watch are 1.1800 to the upside, and 1.1712 to the downside, as the break of any of those extremes should result in some directional continuation heading into Tuesday.
Support levels: 1.1715 1.1690 1.1660
Resistance levels: 1.1800 1.1830 1.1860
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