The US inflation affair, and the EUR/USD movement

During the last session of last week, the EUR/USD broke the schemes, violating the range that characterizes last week after slightly better than expected US CPI data, fueled by rents and medical services.

The technical analysis have little to do about it: the 5-day moving average has fallen under the 20-days one and this is exclusively explained by a market reaction.

eurusd-19set

 

The retracement which led the cross trading at $1.1150 represents the 50% of the gains made in mid-July and the next hurdle on the downside will be 61,8% but first the pair have to overcome some important levels, like $1.1145 and $1.1120, both tested in early-September.

If we take a look at the US Macro situation, moreover, we can see that the inflation level is still under the Fed Target (from 51 months).

This is in contrast, however, with the growth of the service costs (+3,2% y/y), of the medical care costs (+5,1% y/y) and with the shelter costs (+3,4% y/y), while the Fed level still remains @ 1,6%.

Interesting and controversial story: there’s no inflation on good prices, but high inflation on service prices. Recently CPI data didn’t push the Fed to make a move on the rate in September, but in December the story could be different. In this scenario the only parameter who still remains high is the feared (or loved) VOLATILITY.

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