The EUR/USD pair continues to gravitate around the 0.9700 level, unfazed by U.S. Producer Price Index data or the latest FOMC minutes as investors await the consumer inflation figures due on Thursday.
At the time of writing, the EUR/USD pair is trading at the 0.9700 area seesawing between small gains and losses, having retreated from a daily high of 0.9735 and hit a low of 0.9667.
The U.S. Bureau of Labor Statistics released September Producer Price Index data. The PPI inflation slowed to 8.5% YoY from its previous reading of 8.7% and slightly above the 8.4% expected. On the other hand, the core PPI inflation (which excludes energy and food volatile items) slowed to 7.2% YoY from August’s 7.7% and came in below the market’s consensus of 7.3%.
Meanwhile, the Federal Open Market Committee (FOMC) minutes offered no surprises. They reaffirmed the FOMC’s strong commitment to returning inflation to the 2% objective, with many members stressing the importance of staying on this course “even as the labor market slowed.”
Investors’ tightening expectations are still adjusting, and according to the WIRP tool, swap markets are pricing 18.7% odds of a 50 bps hike for the November meeting and 81.3% odds in favor of a 75 bps hike. Unless inflationary pressures show compelling evidence of a slowdown, FOMC members will most likely fulfill expectations and take the bigger hike.
From a technical standpoint and according to the daily chart, the EUR/USD pair holds a short-term slightly bearish perspective. The price stands below its main moving averages, while indicators fell into negative territory, losing directional strength. The RSI holds below its midline but stands flat, while the MACD printed another shy red bar.
On the downside, the following support levels are seen at the 0.9635 area, followed by the 0.9600 psychological mark and the cycle low of 0.9535. On the other hand, short-term resistances could be faced at the 0.9730 zone, followed by this week’s highs at the 0.9780 area.
Still, the euro needs to regain the 20-day SMA, currently around 0.9810, to ease the immediate selling pressure and aim for a steeper recovery.