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EUR/USD Back below the 0.9800 figure on US hot PCE and solid US dollar

  • EUR/USD trips down ahead of the end of the week, month and Q3.
  • US Fed officials continued with their “restrictive policy” rhetoric, agreeing that further hikes are coming.
  • US Core PCE surpassed analysts’ expectations, paving the way for another 75 bps Fed hike.
  • EU’s inflation jumped above the 10% threshold, and money market futures expect another 0.75% increase.

The EUR/USD retraces from daily highs of around 0.9853 due to Fed officials expressing the necessity of higher rates for longer, as the US central bank battles elevated inflationary pressures above the 6% threshold, as shown by the Fed’s preferred gauge of inflation, on Friday. At the time of writing, the EUR/USD is trading at 0.9788, below its opening price by 0.29%.

A bunch of Fed policymakers crossing news wires, led by Vice-Chair Lael Brainard, expressed that the Fed needs to keep interest rates higher-for-longer, so the bank can attain its goal. She added that the Fed would not pull back prematurely while echoing other colleagues’ expression of not knowing where rates would peak. Later in the same tone, San Francisco’s Mary Daly commented that further hikes were coming and that the Fed is “resolute” in taming inflation.

At the time of typing, Richmond’s Fed President Thomas Barkin said that he’s “comfortable” with the pace of rates, adding that it’s uncertain how much the Fed will have to do to lower demand to reach its inflation target.

Aside from this, the US Commerce Department revealed that the US Federal Reserve’s favorite measure of inflation, known as the PCE, increased more than estimated in August, at a 0.3% MoM pace, 6.2% YoY, while core PCE, which excludes volatile items, accelerated at a 0.6% MoM, up 4.9% YoY.

Of late, the University of Michigan Consumer Confidence Final reading was 58.6, less than previously reported. In the same report, inflation expectations for one year jumped to 4.7% from 4.6%, while for five years, it decelerated to 2.7% from 2.8% previously.

Given US economic data revealed in the week, even though it’s not outstanding, showed resilience. With Fed policymaker’s hawkish rhetoric, the US central bank might be headed for the fourth-consecutive 75 bps rate hike in November.

Across the pond, the EU reported inflation data surpassing the 10% threshold, headwinds for the economy of the block. Analysts are expecting another large hike by the ECB and coupled with factors like the escalation of the Russia-Ukraine conflict, with Vladimir Putin’s signing of a decree to annex four Ukrainian regions, will exert extra pressure on the euro.

EUR/USD Key Technical Levels

EUR/USD

Overview
Today last price0.979
Today Daily Change-0.0026
Today Daily Change %-0.26
Today daily open0.9816
 
Trends
Daily SMA200.9901
Daily SMA501.0039
Daily SMA1001.0251
Daily SMA2001.0663
 
Levels
Previous Daily High0.9816
Previous Daily Low0.9636
Previous Weekly High1.0051
Previous Weekly Low0.9668
Previous Monthly High1.0369
Previous Monthly Low0.9901
Daily Fibonacci 38.2%0.9747
Daily Fibonacci 61.8%0.9705
Daily Pivot Point S10.9696
Daily Pivot Point S20.9576
Daily Pivot Point S30.9515
Daily Pivot Point R10.9876
Daily Pivot Point R20.9936
Daily Pivot Point R31.0056

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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