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It seems that yesterday, in the absence of any news, market participants decided to prepare in advance for today's release of data on inflation in the United States and are playing against the opposite. That is, the euro confidently strengthened its position despite the fact that a significant increase in inflation has been forecast. Although the growth of inflation in the United States is a negative factor for the single currency. But such tricks happen quite often in the market, and speculators try to maximize their profit at the time of the release of important news. So this means that market participants are counting on the growth of US inflation.
However, before we talk about inflation in the United States, we should focus on industrial production in Europe. Moreover, the rate of its decline should slow down from -28.0% to -20.2%. And to some extent, this is a justification for the euro's strong growth, which began yesterday. After all, the improvement of the situation in the industry is an extremely positive factor.
Industrial production (Europe):
But it is clear that the main event of the day is the release of inflation data in the United States. Moreover, it is expected to grow from 0.1% to 0.5%. Some even forecast growth of up to 0.6%. And in theory, it is worth preparing for the fact that the dollar could steadily strengthen during the US session. However, recent data on producer prices put these forecasts in serious doubt. There is a high probability that the increase in inflation will be much more modest. However, in this case, the picture will not change much, since the dollar weakened yesterday without any serious reasons at all. In other words, the euro is already overbought, and even a slight increase in inflation in the United States will be sufficient reason for its weakening. But if inflation in the United States remains unchanged or even decreases, then we should not be surprised by the further growth of the single European currency. So there are various possible scenarios. Therefore, it is not worth taking risks and it is better to act on the situation.
Inflation (United States):
From the point of view of technical analysis, we see high speculative activity, during which the quote managed to locally soar to a July 9 high of 1.1370, where there was a systematic slowdown and as a result, a rebound in the opposite direction.
Considering the trading schedule in general terms (daily period), it is worth considering that the price movement follows the horizontal channel that was set by the market in the middle of the past month. Therefore, it is still possible to maintain the 1.1180/1.1400 range in the market.
We can assume a temporary price fluctuation in the range of 1.1335/1.1355, where if the price is pinned lower than 1.1335, it will pave the way in the direction of 1.1300-1.1260. An alternative scenario will be considered if the price is fixed higher than 1.1375, in case US data does not meet expectations. As a result, the quote could touch the area of 1.1400/1.1420.
From the point of view of complex indicator analysis, we see that the indicators of technical instruments on hourly and daily periods signal a purchase by focusing the price within the value of 1.1350.
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