EURUSD Euro boosted after US inflation

European stock markets are moving lower on Thursday after rebounding in the last two sessions in a market context still dominated by inflation and monetary policy issues.

On Wednesday, markets were buoyed by expectations of monetary easing in China and U.S. where inflation figures that came in line with expectations over the year, while investors feared that an upward surprise would reinforce the Federal Reserve’s restrictive bias.

Wall Street finished higher Wednesday after inflation data came in as expected, despite a decades-long spike, helping to ease fears that the U.S. Federal Reserve will tighten its support measures faster than expected.

However, St. Louis Fed President James Bullard said in the evening that four interest rate hikes now appear necessary this year to combat high inflation.

Official data showed that U.S. consumer price inflation decelerated in December at a monthly rate, but reached a yearly peak not seen in four decades. An annual increase in line with the consensus.

Among the tools that the US central bank wants to use to fight inflation are the increase in interest rates, which should begin in March according to analysts, and the ‘tapering’ of its bond purchase programs.

Weighed down in the past by rising U.S. Treasury yields and conservative Fed comments, high-growth stocks have rebounded this week as investors watch a number of factors to assess whether to build on this trend or protect themselves from a possible return to the red.

From a technical perspective, EURUSD confirmed a bullish technical signal on Thursday after U.S. inflation figures. The pair had been consolidating in an ascending triangle for several weeks. Thus, the break of the upper bound at $1.1370 opened the way for a bullish acceleration.

In addition, prices were also moving in a bearish channel. Therefore, the breakout from the top reinforces our scenario. According to the chart analysis, the theoretical target is set around $1.15250.

Buyers are gradually regaining momentum and the EURUSD remains well positioned to regain height.


Analyzed by: Mr.Thibault Moirez, Independent Analyst

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