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The state of affairs in the UK remains unchanged for now. The only thing is that the Bank of England began buying government bonds yesterday, which will last until October 14, and the total volume of purchases will amount to 80 billion pounds. But the market has known about this since Wednesday, so it didn't come as a surprise. However, in response to criticism, Prime Minister Liz Truss said that she did not intend to abandon the plan presented last Friday to support the economy. If we add the fact that the Conservative Party, whose leader is Truss, has criticized the plan, then the likelihood of another political crisis in the United Kingdom is growing. So things are not going well in Great Britain.
Nevertheless, the dollar was noticeably losing its positions yesterday. And the fact is that in the absence of any changes in the UK, market participants were finally able to pay attention to macroeconomic statistics. And just yesterday, updated forecasts for inflation in the euro area appeared, preliminary data on which will be published today. Judging by these forecasts, inflation should accelerate from 9.1% to 9.7%. Consequently, the European Central Bank will continue to raise interest rates. In principle, the market has been ready for this for a long time. But the fact is that this process may take a little longer. But in the United States, inflation has been declining for the second consecutive month. As a result, the following situation may turn out when the Federal Reserve stops raising the refinancing rate and begins to prepare the markets for a gradual easing of monetary policy, while the ECB will continue to raise its interest rates at the same time. Which will eventually lead to the fact that in Europe the level of interest rates will be higher than in the United States. And this may happen as early as next year. And in the first half of it. Apparently, this was the reason for the euro's growth. And if inflation expectations are confirmed today, it will be able to strengthen even more, coming closer to parity.
Inflation (Europe):
The EURUSD currency pair is in the correction stage from the local low of the downward trend. As a result, the positions on the euro strengthened by about 3.2%, which is about 300 points. Despite the fact that the volume of the upward movement is considerable, the euro is still cheap.
The RSI H4 technical instrument crossed the middle 50 line from the bottom up. This technical signal indicates the active formation of a correction in the market.
The moving MA lines on the Alligator H4 have changed direction from bottom to top, which also corresponds to a corrective move. Alligator D1 is directed downwards, ignoring the correction move at this stage.
Expectations and prospects
Maintaining a corrective course in the market may well return the quote to the level of parity. Even with this scale of growth, bulls will still have a power reserve.
It is worth noting that the market has been heavily subject to speculation lately. For this reason, chaotic price jumps may occur, in which signals from technical analysis will be ignored.
Complex indicator analysis in the short-term and intraday periods indicate long positions on the euro due to the construction of a corrective course.
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