The inflation data of the United States (US) which was the main focus in the New York session yesterday really shook the market, seeing a significant jump in the US dollar until the end of the session.
Overall, the latest US inflation reading remains strong compared to market expectations of a decline, and this reinforces expectations for the Federal Reserve (Fed) to continue its previously aggressive monetary policy tightening measures.
Thus, the US dollar has strengthened to record the biggest daily jump since March 2020 based on the reading of the dollar index.
Other major currencies including the Euro continued to weaken amid a significant strengthening of the US dollar even as the European central bank (ECB) also presented hawkish signals for their monetary policy.
On the price chart of the EUR/USD currency pair, the price which initially hovered around 1.01850 in the European session then plunged more than 200 pips to close the end of the New York session below the parity level of 1.0000.
The price movement started to continue flat at the start of the Asian session this Wednesday morning, hovering above the 0.99500 support level which became a focus zone during the ECB meeting last week.
A bearish trend reversal signal has been seen with prices plunging below the Moving Average 50 (MA50) barrier level on the 1-hour time frame on the EUR/USD chart.
With the significant decline that occurred, the price is seen to be more likely to continue further decline past the support level of 0.99500 and further towards the main support zone at 0.98800.
A continued decline past the 0.98800 support will record the latest 20-year low with a target to reach 0.98000.
On the other hand, if the price rises above the 1.0000 parity level again, the price will likely head back to the 1.01000 resistance.
And it is likely that the high level reached yesterday will become the focus again if the price trend changes again.
