EUR/USD Fails To Continue Surge After US Inflation Data Weighs US Dollar

 The attractive price movement was witnessed by investors in the New York session on Tuesday, especially for the US dollar which was the focus.

The United States (US) consumer price index data for August recorded a reading of 0.3% lower than the expected 0.4% decline from the previous reading of 0.5%. The core reading also slipped to 0.1% lower than expected to remain at 0.3%.

The fall in the US inflation rate is seen as dampening expectations for the Federal Reserve (Fed) to tighten policy in the near future as well as giving a negative reaction from investors to the US dollar trade.

However, the depreciation of the US dollar is only temporary following the latest report of some Fed officials suggesting for the central bank to reduce asset purchases by the end of the year.

While waiting for the FOMC meeting next week, let’s see what has happened to the price chart of the EUR/USD currency pair as of yesterday’s trading.

The price was seen to have significantly surged at the beginning of the New York session after touching the support level of 1.18000 registering a rise of around 45 pips to the high of 1.18450.

However, the price was seen to show a decline until the end of the session, returning to the support level of 1.18000 before the price flattened at that level to continue at the beginning of the Asian session this morning (Wednesday).

If the 1.18000 level still manages to support the price rebound towards the end of the week, investors are expecting the highs on the surge in yesterday’s New York session to manage the price to move to higher levels.

With US expectations continuing to weaken, the price will continue to rise testing the 1.19000 resistance zone.

On the other hand if Fed officials ’insistence to tighten policy further affects the market, the US dollar is likely to show a strengthening ahead of next week’s meeting.

A drop below the 1.18000 level will give an early signal for a bearish trend before the price tests the support level earlier in the week around 1.17700.

The continued lower decline is seen heading towards the support zone at 1.17000 for the price to record the latest 3 -week low.

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