The volatility in EUR/USD has decreased in recent days, and this isn’t surprising. From this day a series of important events for the market begins: core CPI in USD, decision of the Fed, ECB, England, Swiss, and Norway on the interest rate, and CPI in the EU. The volatility in the pair will significantly grow after these events.
Today, at 16:30 by Moscow, we will know the core CPI in the USA. According to Bloomberg's survey of economists, it is supposed that the index will show an increase in main prices by 0.3% compared to October, and by 7.3% compared to 2021. We will remind you that the inflation growth in October was 0.4% and 7.7% in the previous month and the previous year respectively.
Market participants wait for signals confirming that the underlying inflation pressures continue to decrease. This should weaken the dollar at the end of the year. However, the sharp increase in inflation may provoke an even stronger reaction after the recent weakening of the dollar.
We can conclude that in case of inflation worse than expected, we can see a sharp strengthening of the dollar that can be caught. Low inflation will only confirm the market's assumption of easing the tightening of the Fed's policy and the reaction won’t be so strong.
Technically, the EUR/USD currency pair demonstrates resistance to growth in the form of the Fibonacci level, which has previously acted as a significant level. Also, it is necessary to note the divergence in RSI, thus the indicator declines, while the currency pair grows. This reveals a bearish trend.
The 200-Day Moving Average can be the nearest goal of decrease, as there is a trend line next to it, from which a rebound of the euro (1.036) is possible. Below this, the Fibonacci level of 0.236 (1.020) will be the next goal. Currently, we should focus on the first goal of 1.036. Stop-loss can be placed behind the Fibonacci level and a little above the local high (1.065). As we wrote at the beginning, the market volatility will be high after the release of the data, so it is better to set a take profit and a stop-loss in advance.
Decrease of currency pair EUR/USD:
Take profit — 1.036
Stop-loss — 1.065
This content is for informational purposes only and is not intended to be investing advice.