Yesterday, the was still edging down although at a slower pace than on Friday. Closer to the end of the trading day, sentiment changed drastically, and the started incurring losses. The fact is that the US Federal Reserve published its consumer inflation expectations yesterday. Thus, expectations for the year ahead increased to 5.2% from 4.8%, compared with a 4.9% forecast.
This means that the US regulator does not expect inflation to go down soon. In the best-case scenario, inflation may stabilize around its current level. At the same time, the indicator has been at a record level for the past several decades. Such a high rate may disrupt the economic recovery in the country. If inflation stays high for a long time, the possibility of such an outcome will increase exponentially.
United States Consumer Inflation Expectations:
Today, the market will still focus on inflation. The US consumer price inflation rate is estimated to fall to 5.3% from 5.4%, thus alleviating concerns about a steady recovery of the US economy. Although inflation expectations indicate that a further slowdown in inflation is highly unlikely, the very fact of a slight decrease can be considered an extremely positive factor. All this will weigh on the euro.
United States Inflation Rate:
From the 1.1880/1.1905 resistance zone, the quote fell to 1.1770, where a rebound occurred. The Relative Strength Index (RSI) confirmed that the euro was overbought during the downward trend. As a result, a buy signal was generated when the indicator crossed down/up through 30.
On the daily chart, the price is seen recovering relative to the corrective move as of Aug. 23 – Sept. 3.
The market is expected to remain bearish. However, for the downward trend to resume, the quote should consolidate below 1.1800. This is likely to lead to an increase in the volume of short positions. As a result, the price may go down to 1.1770-1.1700. Alternatively, if the quote consolidates above 1.1850, the trend may reverse.
In terms of complex indicator analysis, technical indicators are sending a buy signal for short-term and intraday trading due to a rebound. As for medium-term trading, technical indicators are generating a sell signal because of the pair’s downward movement from the 1.1880/1.1905 resistance zone.