Yesterday, the market dynamics were sluggish ahead of key macroeconomic events. Today, a bunch of crucial reports are coming which will surely influence investor sentiment. So, the market is going to be rather volatile today.
The first report that saw the light was the industrial production data from the United Kingdom. However, a slight decrease in manufacturing output growth from 0.7% to 0.4% has barely changed the market sentiment. Investors are more eager to learn the inflation figures from the United States.
This is proved by the market reaction to the publication of the eurozone manufacturing data. There, the industrial production output declined by -2.2% versus a previous decrease of -1.1%. This result has much exceeded expectations of a moderate slowdown to -0.3%. However, this data failed to spur any significant movement.
Let us stress once again that the US inflation data is under the spotlight today. Some analysts anticipate an increase in the price growth pace to 3.5% from 3.2%. Some experts even forecast a rise to 3.6%.
Anyway, the fact of a further inflation rise, which is widely expected, will leave no doubts regarding the outcome of the nearest FOMC meeting. The federal funds rate is likely to be raised again. In turn, this would favor an uptrend in the US dollar.
As for the technical picture, the EUR/USD pair has pulled back from the recent key area near 1.0680. This move did not change the overall tendency, so the market continues trading downside.
At the same time, this pullback can be considered an initial stage of the euro recovery. In such a case, we should expect a technical signal about a rise in buy trades volume after the price holds above 1.0800. Meanwhile, there is a high possibility that the price will return to the level where the current downward cycle started, especially if the price holds below 1.0650, which would keep the current trend valid.
The GBP/USD hovers near the lower boundary of the current downward cycle. As a result, the pair is fluctuating within a 100-pip channel.
In this situation, traders pay much attention to the temporary span between 1.2450 and 1.2550. If the price holds below or above any of these levels, it would indicate an end to the flat trend. As a result, it will serve as a signal for a further price direction.
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00:00 INTRO
00:19 UK INDUSTRIAL PRODUCTION CHANGE, Y/Y
00:43 EUROZONE INDUSTRIAL PRODUCTION, Y/Y
01:14 THE US INFLATION DATA
01:35 FEDERAL FUNDS RATE
01:56 EUR/USD
02:46 GBP/USD