Forex News: Fed Officials Fear Low Inflation. Another Hike This Year Still Possible

EUR/USD

Forex News: The pair continued on a bullish path before the FOMC Meeting Minutes release, which revealed that some Fed officials fear that low inflation is not “only transitory”. The greenback weakened at the time of the release but volatility remained relatively normal.

Fed Officials Fear Low Inflation. Another Hike This Year Still Possible 1

Technical Outlook

It looks like the Dollar’s next move will be decided by inflation data but for the time being, the American currency lacks strength and the pair is climbing. However, price is currently at a resistance zone created by 1.1840 and 1.1875, with the Relative Strength Index in overbought territory. This calls for a bounce lower, which will probably occur once 1.1875 is hit. As long as the mentioned level remains intact, our bias is bearish, expecting a bounce lower.

Fundamental Outlook

The U.S. Producer Price Index will be today’s most notable release for the US Dollar, scheduled at 12:30 pm GMT. The indicator tracks changes in the price that producers charge for their goods and it has inflationary implications because a higher producer price usually leads to a higher consumer price. Today’s expected change is 0.4% (previous 0.2%) and numbers above forecast strengthen the greenback.

At 2:30 pm GMT, ECB President Draghi will speak about monetary policy in Washington DC, at the Peterson Institute for International Economics. The impact cannot be anticipated but caution should always be used when heads of central banks speak publicly.

 

GBP/USD

The pair remained in a range for most of yesterday’s trading session and the FOMC Minutes created a small climb due to US Dollar weakness. Overall no special developments took place and price action was slow.

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Technical Outlook

Currently the pair is drifting without clear direction, meaning that we can see either a move up or down. The 50 period Exponential Moving Average is also flat, adding to the uncertainty, so until we see a clear break of 1.3250 or 1.3160, our bias is neutral. The Relative Strength Index is not showing an overextended condition but the Stochastic is overbought and crossing down; this is not a strong bearish signal but combined with the inability to move above the 50 EMA, it may suggest that lower prices will follow.

Fundamental Outlook

The Pound has another light day ahead, so the technical aspect and the U.S. data will be the main price drivers.

 

Written by: Bogdan Giulvezan

The article above is based on the writer’s 7-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.