From “Hard” to “Soft” to “No Landing”? The CPI Will Tell
EUR/USD Breaks Down After Double Top at 1.1200
The US Dollar is riding high on the back of better-than-expected jobs data released last Friday. All three job indicators exceeded expectations, showing that the inflation war is close to being over without an economic recession.
The NFP showed that 254K new jobs were created during the previous month, as opposed to the forecast 147K and the previous 159K. The Average Hourly Earnings overshot expectations by 0.1% and the Unemployment Rate dropped from 4.2% to 4.1%.
According to these numbers, the U.S. economy is thriving despite an extended period of tight monetary policy. This led some voices to claim the U.S. economy is headed toward a “no landing” scenario, while previously the best-case scenario was a “soft landing”.
Economic Calendar Highlights
The main event of the week will be the CPI, which will offer more light on the inflation wars but before that, we have a relatively calm week.
The Eurogroup Meetings will take place Monday in Brussels and there will be a few speeches from policymakers. Also, FOMC Member Bowman and FOMC Member Kashkari will speak in the evening in San Antonio and Minnesota, respectively.
Tuesday will be governed by speeches as well. Among the speakers are FOMC Members and German Buba President Nagel, each in different places.
The FOMC Meeting Minutes will be released Wednesday at 6:00 pm GMT. The document contains details of the reasons behind the latest rate vote and it could offer some clues regarding the size of the next cut.
The main event of the week takes place Thursday and it’s the release of the U.S. Consumer Price Index (CPI), scheduled at 12:30 pm GMT. The monthly Core version is expected to drop to 0.2% from the previous 0.3%, while the yearly headline figure is expected to drop to 2.3% from the previous 2.5%.
The final release of the week will be the U.S. Producer Price Index (PPI), scheduled for release Friday at 12:30 pm GMT.
Technical Outlook – EUR/USD
The recent price action created a double top at 1.1200, which sent the pair through the 50-day Moving Average and the support at 1.1000. Bearish divergence was also present at 1.1200, as shown by the RSI which made a lower high while the price made a double top.
Now it looks like the dollar is accelerating and gaining strength across the board. The next probable destination is 1.0900 but we may see pullbacks when the RSI reaches oversold. The previous support at 1.1000 may act as resistance and the same is true for the 50-day MA.
