EUR/USD Edges Higher After Signs That U.S. Inflation Is Easing
Alex Boltyan | Aug 11, 2022 05:01PM ET
The EUR/USD pair extended gains into a fourth day on Thursday as another batch of data continued to point at inflation having already peaked in the U.S. and began to decelerate.
At the time of writing, the EUR/USD pair trades at the 1.0320 zone, 0.23% above its opening price, having hit a daily high of 1.0364, a few pips shy of its one-month peak of 1.0368 struck on Wednesday.
The U.S. Producer Price Index grew 9.8% over the 12 months to July, decelerating from June's 11.3% rate and below the market's consensus of 10.4%. The Core PPI rose by 7.6%, in line with expectations and easing from June's 8.4% reading. On Wednesday, U.S. Consumer Price Index surprised to the downside, rising 8.5% down from 9.1% in June.
Softer CPI and PPI figures might be the early sign of cooling inflation that the Fed was waiting for. Tightening expectations continue to adjust in favor of a lower hike of 50 bps in September instead of a 75 bps move, as was the case in the last two meetings.
The greenback, measured by the DXY index, is down for a second consecutive day and trades at around 105.00 after finding support again at the 104.60 area. The dollar could not benefit from higher yields. The United States 10-Year note yield soared nearly 4% to 2.902%, while the 30-Year yield reached 3.189%.
According to the daily chart, the EUR/USD keeps a positive short-term bias as the price approaches a descending trendline, and indicators hold positive territory. The RSI continues to gain a steeper positive slope and stands above its midline, while the MACD printed a higher green bar, indicating a growing buying interest.
On the upside, immediate resistance levels are seen at the Aug. 10 high of 1.0368, followed by the 1.0400 psychological mark, and then the 1.0410 area, where the upper end of a descending channel is drawn from February's high stands. On the other hand, support levels are observed at 1.0300, and the 20-day SMA is currently at 1.0203.
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