The 1.0115 confluence hurdle continues to cap the EURUSD pair and now, Focus CPI.
EUR/USD is having difficulty climbing beyond the 1.0100 mark.
The EURUSD pair is starting off the new week on a positive note, but is having trouble maintaining momentum and climbing beyond the 1.0100 mark. Prices have remained steady near the 1.0115 area, which is a three-week high that was reached last Friday. The downside doesn’t seem as severe as it could be, thanks to predictions that the European Central Bank will raise interest rates more steeply this year. This is significant because last week the ECB took unprecedented action by increasing rates by 75 bps in an effort to control inflation, which surged to a record 9.1% in August and is expected to rise even higher in the coming months.
The ECB also expects to raise interest rates further to dampen demand. This might continue to act as a tailwind for the shared currency, which, along with the prevalent US dollar selling bias should extend some support to the major.
The markets are currently pricing in a 75 bps rate hike at the next Federal Open Market Committee meeting on September 20-21. This was reaffirmed by the hawkish remarks made by Fed Governor Christopher Waller, suggesting that he could support another significant interest rate increase later this month. Waller added that the pace of tightening is uncertain and will depend on the data. He also said that it was too soon to say whether inflation was moving persistently downward. The market’s focus will now shift to the US consumer inflation figures, which are due to be released on Tuesday.
The CPI report will have a significant impact on the Fed’s policy outlook, which will affect the USD in the short term. This should provide some direction for the EUR/USD pair. However, traders might not take any aggressive positions on Monday since there is no relevant economic data.
Additionally, concerns that an extensive energy crisis in Europe could pull the region’s economy deeper into recession might also contribute to limiting the EUR/USD pair. At an emergency meeting late last week, the Eurozone energy ministers disagreed on plans for a price cap on all gas imports and a levy on power producers. Because of this, it would be wise to wait for concrete follow-through buying before positioning for an extension of the recent bounce from a two-decade low touched last week.
The 50% Fibonacci retracement level of the August-September downfall, near 1.0110-1.0115, now seems to be acting as strong resistance. This is confirmed by the 200-period SMA on the 4-hour chart. A sustained move beyond this barrier has the potential to push the EUR/USD pair towards the 1.0175 area, or the 61.8% Fibonacci level. This is followed by the 1.0200 round-figure mark, which if cleared decisively will be seen as a fresh trigger for further bullishness. This, in turn, will pave the way for a move towards the next relevant hurdle near the 1.0265-1.0275 zone.
