EUR/USD – Slow rise to resistance
James Chen October 14, 2015 2:06 AM
<p>EUR/USD has spent the past three weeks in a rather gradual rise from 1.1100 support in late September up towards key resistance around the 1.1450 […]</p>
EUR/USD has spent the past three weeks in a rather gradual rise from 1.1100 support in late September up towards key resistance around the 1.1450 level.
With the exception of a brief spike up to the 1.1700 level in late August, the 1.1450 price area has served as the primary resistance level for the currency pair almost since the beginning of the year. The last time that this level served as an upside barrier was just in mid-September.
The EUR/USD rise of the past few weeks has primarily been driven by a weakened US dollar that has been pressured due to recently reinforced expectations of a delayed rate hike by the Fed. All-important inflation data coming out of the US this week should help either confirm or change these expectations. The Fed cited low inflation as one of the primary reasons for delaying an initial rate hike last month.
On Wednesday morning there is the Producer Price Index, which is a key indicator of consumer inflation. Also on Wednesday is US retail sales, which is an important economic indicator. Thursday brings the Consumer Price Index, another major inflation release.
While the markets are generally expressing doubt over a 2015 rate hike at the current time, any higher-than-expected inflation readings this week could erode that doubt, thereby potentially supporting the US dollar. Of course, lower-than-expected inflation would most likely have the opposite effect of confirming rate hike doubts and pressuring the US dollar further.
From a technical perspective, the noted 1.1450 resistance area continues to be the level to watch. A retreat from that resistance should prompt a reversion back down towards support targets at 1.1100 and then 1.0800. In the event of a data-driven breakout above the 1.1450 level, any significant EUR/USD rally should be met by strong resistance around the 1.1700 level.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.