EUR/USD Forecast: US inflation unwinds panic selling

Valeria Bednarik FXStreet

EUR/USD Current Price: 0.9650

The US Consumer Price Index rose 8.2% in September, barely easing from the previous month.
Market players anticipate a more aggressive Fed and a recession due to monetary tightening.
EUR/USD plunged to a fresh weekly low and will likely remain on the back foot.

The EUR/USD pair fell to a fresh weekly low of 0.9630 following the release of the US Consumer Price Index. According to the official release, US inflation rose 8.2% YoY in September, barely easing from the previous 8.3% and higher than the 8.1% expected. In addition, the core reading was higher than anticipated, reaching a multi-year high of 6.6%. Hell broke loose with the news, and the greenback soared after spending the first half of the day on the back foot as market players rushed to price in a potentially more aggressive US Federal Reserve.

The central bank will continue tightening its monetary policy, regardless of the negative effects on economic growth. For the two meetings left this year, 75 bps are priced in, which will lead to a rate of 4.4%, in line with the Fed’s objective. The downside is that it would probably translate into a recession. Wall Street collapsed with the news, while government bond yields soared. Markets are in panic mode, a situation that will likely extend after the US opening.

Ahead of US inflation data, Germany released the final version of the September Consumer Price Index, confirmed at 10.9% YoY in its EU-harmonized version. The core reading also matched the preliminary estimate of 2.2%.

EUR/USD short-term technical outlook

The EUR/USD pair is currently hovering around 0.9650, maintaining its near-term bearish stance. The 4-hour chart shows that it broke below a mildly bearish 20 SMA, also below the 23.6% Fibonacci retracement of its latest daily rally at 0.9690. The Momentum indicator barely retreats from its midline, while the RSI indicator is stable at around 39, suggesting sellers are not yet strong enough. However, a bearish extension seems likely, given the broad greenback strength.

Support levels: 0.9615 0.9570 0.9525

Resistance levels: 0.9690 0.9745 0.9790

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

AUD/USD bounces off multi-month low, nears 0.6900

AUD/USD edges higher toward 0.6900 in the Asian session on Wednesday, recovering some of the previous day’s losses to its lowest level since March as the US Dollar stalls the hot US CPI-inspired rally amid hopes of a US-Iran peace deal. Meanwhile, hawkish comments from FOMC members have almost confirmed another December rate hike, which favors USD bulls and should cap the Aussie.

USD/JPY remains capped below 159.00 amid looming intervention risks

USD/JPY struggles to build on the previous day’s strong gains to a near one-month top as intervention risk supports the Japanese Yen while hopes of a US-Iran peace deal cap the safe-haven US Dollar. That keeps the pair's upside limited below 159.00, for now.

Gold extends gains beyond $4,050; upside seems capped as Fed hike bets support USD

Gold climbs further beyond $4,050 heading into the European session on Wednesday, reversing a part of the previous day's heavy losses, though the upside seems limited. Tuesday's hot US inflation figures fuel expectations of a more aggressive policy tightening by the US Federal Reserve (Fed). This helps the US Dollar (USD) preserve Tuesday's strong gains, despite hopes for US-Iran diplomacy, and might keep a lid on any meaningful appreciation for the non-yielding bullion.

Pi Network extends gains against a bearish market backdrop

Pi Network continues to attract some buyers on Wednesday after an over 8% rebound the previous day. PI token sustains above $0.070 as the price extends its rebound after reaching an oversold level, decoupling from the broader market correction. Technically, Pi Network must break above the overhead trendline near $0.0740 to resume an upward trend.

Hot CPI helps cement December Fed hike as Nvidia slumps

October CPI inflation landed yesterday and beat expectations across the board. Note that we only received the MM figures because of last year’s government shutdown. Headline MM came in at 0.4%, beating the 0.3% forecast, though below September's 0.6%. Core MM also came in at 0.3%, slightly higher than the 0.2% estimate and matching the prior month’s reading.

Gold reclaimed $4,100. Tuesday’s CPI test decides if it holds

Gold (XAU/USD) starts the week on a positive note, reclaiming the $4,100 psychological level as the US Dollar (USD) retreats from its recent highs. The precious metal recovers from Friday's losses, although investors remain cautious ahead of Tuesday's US Consumer Price Index (CPI) report, which could determine the next direction for Bullion.