The US Dollar regained positive traction on Thursday and moved back closer to a 13-month peak, prompting some aggressive selling around the EUR/USD pair. After a rather muted reaction to mixed US economic data - weekly jobless claims and producer price index, the greenback caught some strong bids following hawkish comments by Chicago Fed President Charles Evans.
Evans, a known dove, said that the US economy is performing very well and continued growth has cleared the way for one or two more interest rate hikes in 2018. He also dismissed earlier worries about weak inflation as the economy’s extremely strong performance made him confident that inflation will stay near or even move slightly above the Fed’s 2% target.
Traders on Friday will be keeping a close eye on the latest US consumer inflation figures, anticipated to have risen by 0.2% m/m in July. Any immediate reaction to the disappointing headline print is likely to be limited as it might not be enough to derail the Fed from a gradual rate hike path. Hence, the greenback might continue with its ongoing bullish trend and exert some fresh downward pressure on the major.
From a technical perspective, the pair has slipped below a descending triangle formation on the daily chart and also below the key 1.1500 psychological mark, confirming a fresh bearish breakdown. The downward trajectory now seems to get extended towards 1.1445 intermediate support before the pair eventually breaks below the 1.1400 handle and aims towards testing its next support near the 1.1365 region.
On the flip side, any recovery attempts back above the triangle support break-point - the 1.1510 area, might now confront fresh supply and seems more likely to remain capped near the 1.1545-50 supply zone.
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