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

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

18.01.2023

In the U.S. currency market yesterday, the U.S. dollar strengthened against the euro despite the New York Fed’s Manufacturing Index—released yesterday—coming in at -32.9%, a significant deterioration from the market forecast of -8.7%.The EUR/USD pair fell back by about 90 pips from 1.0868 to 1.0773. The price closed below the 75-period moving average (MA) on the hourly chart. Since the EUR/USD pair broke well below the 20-period MA on the 4-hour chart due to yesterday’s decline during U.S. trading hours, traders should be wary of a continued decline during European trading hours.

Among European currencies, the euro became the weakest 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 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 decline further toward the 0.8724 area, which is near the 75-day moving average.

Today’s schedule includes the UK Consumer Price Index and UK Retail Price Index at 4:00 p.m., the Eurozone Consumer Price Index at 7:00 p.m., the U.S. MBA Mortgage Applications Index at 9:00 p.m., U.S. Retail Sales at 10:30 p.m.,U.S. Producer Price Index, at 11:00 PM: remarks by Bostic, President of the Atlanta Fed, at 11:15 PM: U.S. Industrial Production and U.S. Capacity Utilization, at 12:00 AM: U.S. Business Inventories,at 27:00, the U.S. 20-year Treasury auction; at 28:00, the U.S. Beige Book and remarks by Harker, President of the Federal Reserve Bank of Philadelphia. It will be interesting to see if the euro, which has become the weakest currency, will recover following the CPI release.