TRADERS ARE WAITING FOR CONSUMER INFLATION DATA FROM THE US
The EUR/USD price fell today despite positive news on industrial production growth in the Eurozone. Production expanded by 1.4% in August against the forecasted increase of 0.6% and 0.3% growth in July. The possibility of a rate hike in December for the US received another boost following the release of producer price index data that showed growth of 0.4% in September which doubled August’s figure. Investors are anticipating retail sales data and the consumer inflation report in the US which are key indicators for the FOMC. An acceleration of inflation growth will lead to an increased probability of monetary policy tightening before the end of 2017 and that in turn will put significant pressure on the EUR/USD quotes.
The British pound lost some ground due to the lack of progress in negotiations between the UK and European Union on the terms for Brexit. Trade talks that were anticipated to start next week will now be delayed and the news is putting pressure on the sterling.
The USD/JPY quotes are consolidating in expectation of new drivers. Tensions between the US and North Korea and between Catalonia and Spain have eased which leads to lower interest in defensive assets like the Japanese yen. The yen did receive some positive news from the report on Bank lending in Japan that has slowed to 3.0% in September, which was by 0.4% better than the average forecast. An increase in volatility for the guppy is expected tomorrow after the release of the consumer price index (CPI) report in the US.
The single currency rolled back today and approached an important support line at 1.1825. Breaking through this level may become the trigger for further price drops with objectives at 1.1750 and 1.1620. In case of opening short positions, the stop should be set above 1.1875. We do not exclude growth resuming with potential goals at 1.1925 and 1.2000.
The British pound dropped sharply today, but was able to rebound upwards after an unsuccessful attempt to fix below 1.3150. The next target in case of continuing the positive impulse will be 1.3250 and its overcoming may become the basis for more price increases to 1.3400 and 1.3600. In order to resume the descending movement to the 1.3000-1.3050 range, it will need to fix below 1.3150.
The amplitude of price fluctuations of the USD/JPY is falling and that may signal a powerful movement soon. The trigger for this move may come from the CPI report in the US that will be published tomorrow at 12:30 GMT. In order to continue growth up to 114.00 and 114.70 the quotes need to overcome 113.00. The closest supports that may be reached in case of a decline are located at 111.70 and 110.30.