The United States (US) inflation data published last Friday surprised the market when it once again surpassed the reading in the April issue, thus recording the highest inflation reading since December 1981.
The situation has prompted a significant strengthening of the US dollar in the New York session last Friday after investor confidence grew to see the Federal Reserve (Fed) continue its aggressive interest rate hike at this week’s FOMC meeting.
As a result, the US dollar re -strengthened its position in the market at the close of trading last week, sinking most other major currencies including the Euro.
The euro failed to withstand the strengthening of the US dollar after a negative market reaction to the outcome of a meeting of the European central bank (ECB) on Thursday which still kept interest rates unchanged.
On the price chart of the EUR/USD pair, investors have seen a resurgent price plunge and a clear bearish trend change.
Starting in reaction to the decision of the ECB meeting, the price that failed to make a rise past the resistance zone of 1.08000 has plunged all the way below the level of 1.06000 heading to the price support zone at 1.05000.
From the highs reached last Thursday, the price has recorded around 300 pips of decline continuing to the beginning of the Asian session of this week’s market opening which was slightly bearish hovering below the 1.05000 zone.
The price movement remains below the Moving Average 50 (MA50) barrier level on the 1 -hour time frame which signals the price tendency to continue lower this week.
The decline is expected to continue towards around 1.04000 to hit the latest 4 -week low if the US dollar continues to strengthen.
The lower drop beyond that level is likely to reach up to around 1.03000 and record the lowest price level since 2003!
On the other hand, if the change in price direction occurs again, the price increase is seen to first test the 1.06000 level before the continued rise will start giving indications for a bullish movement of the price.
Further price increases will return towards the 1.07000 level or higher to last week’s focus resistance zone at 1.08000.
