The market was surprised by the data published on the consumer price index (CPI) reading of the United States (US) in the New York session yesterday.
The annual inflation reading recorded 6.4% higher than the expected 6.2%. The figure was however down from the previous reading of 6.5%, marking the 7th consecutive month of decline.
However, the decline in the inflation rate is slower than expected and this situation is likely to complicate the decision of the Federal Reserve (Fed) to continue the policy easing measures.
The interest rate hike at 25 basis points is likely to be maintained for several meetings, with some even expecting a 50 basis point hike could happen again.
The price movement reaction was uncertain as soon as the data was published at 9.30 yesterday, witnessing interesting fluctuations in the value of the US dollar.
On the price chart of the EUR/USD currency pair, the price initially made a decline during the initial reaction of the strengthening US dollar.
Reaching around 1.07100, the price bounced back to test the concentration level at the 1.08000 resistance.
After touching that high, the price then plunged again to close the New York session lower again.
The drop in price occurred again, but the price is still hovering above the support level of the Moving Average 50 (MA50) on the 1-hour time frame on the EUR/USD chart which has not yet signaled a bearish movement for the price.
If the US dollar continues to strengthen, the price could fall lower below the MA50 level and test the 1.07000 level.
The lower decline will continue towards the support level at 1.06000 to record the latest 6-week low.
However if the price continues to display an uptrend, the 1.08000 resistance will be tested once again to be broken.
Successfully crossing the zone will drive the price to a higher level such as to the 1.09000 zone or the previous concentration resistance which is at the height of 1.10000.
