CPI exceeded analysts’ expectations, as the Consumer Price Index for July fell to 8.5% compared to the expected 8.7%. This immediately affected the markets. The dollar index lost 1.22% of its value. The low inflation data suggests that the Fed has done its job and there will likely be no more drastic rate hikes. This gave investors hope that perhaps inflation had peaked and was already starting to fall. A worse-than-expected CPI report is seen as negative for the US dollar, and in this case it gave the euro the strength to move higher and test resistance.
Price bounces off trend channel support. Demarker is in a neutral zone, heading to overbought. Sequential has started a new count with a printed 3 to date. The price is currently testing the fib(23.6%), 50 period moving average and the downtrend resistance, with expectations to break them due to good fundamentals. It is possible that the 100 period moving average will provide more price resistance where a small consolidation can be expected.
Quotes are reaching the upper trend line of the descending channel and the price is likely to rebound from resistance, continuing the short trend for a retest of parity levels at 1.00
On a breakout to the upside, the move has the potential to continue for a test of major resistance in the area around 1.06.
Bank expectations are for the price to hold around this level in Q3 and bottom out in Q4 with an increase next year.
The majority of analysts are of the opinion that the price will hold around 1.03 in Q3, with speculation of a rise to 1.17.
Analyst consensus estimates range between 1.0096 and 1.0391.
Dealer Anatoliy Pavlov