All eyes are on whether the euro, now the weakest currency, will rebound following the release of the CPI figures.

All eyes are on whether the euro, which has become the weakest currency, will recover following the release of the CPI figures.

18.01.2023

In yesterday’s U.S. currency trading, the U.S. dollar strengthened against the euro despite the New York Fed Manufacturing Index—released yesterday—deteriorating significantly from the market forecast of -8.7% to -32.9%. The EUR/USD pair fell by approximately 90 pips from 1.0868 to 1.0773. The price closed below the 75-period moving average on the hourly chart.Since the EUR/USD pair has broken well below the 4-hour 20-MA following yesterday’s decline during U.S. trading hours, we should remain cautious of a continued downward move during European trading hours.

European currencies saw the euro become the weakest currency after Germany’s December consumer price index, released yesterday, came in at 8.6%, matching both the previous reading and market expectations. The euro-pound pair fell by approximately 110 pips from 0.8887 to 0.8773.It plummeted to just below the 200 EMA on the 4-hour chart. On the daily chart, the RSI has been falling following a divergence from the 70 level, so we should watch to see if the pair will drop to around 0.8724, near the 75-day moving average.

Today’s schedule includes the UK Consumer Price Index and UK Retail Price Index at 4:00 PM, the Eurozone Consumer Price Index at 7:00 PM, the US MBA Mortgage Applications Index at 9:00 PM, US Retail Sales and US Producer Price Index at 10:30 PM, and remarks by Atlanta Fed President Bostic at 11:00 PM:Atlanta Fed President Bostic’s remarks, at 11:15 PM US Industrial Production and US Capacity Utilization, at 12:00 AM US Business Inventories, at 3:00 AM US 20-Year Treasury Auction, and at 4:00 AM US Beige Book and US Philadelphia Fed President Harker’s remarks. We will be watching to see if the euro, which has become the weakest currency, recovers following the CPI release.