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Inflation data in individual European countries was released yesterday, which usually do not interest traders, since everyone looks at the overall statistics for the entire Eurozone. But this time, speculators were interested in the statistics.
Spain's inflation surged from 0.0% to 1.3%, while Germany's consumer price growth rose from 1.3% to 1.7%. Such a rapid and impressive change worries not only the EU government, but also investors. With such rates, the ECB might completely change its monetary policy.
Due to the fear of uncertainty, the value of the euro declined.
During the US trading session, American data was published, where the S&P/CS Composite-20 for January increased more than expected, namely from 10.2% to 11.1%. This supported the US dollar.
Let's also look at the DXY dollar index chart, which serves as a guide for traders' trading interest in dollar positions.
Since mid-March, it has been repeatedly mentioned that the upward reversal in the index, set in January, has great potential and dollar positions will be relevant among traders in the near future. Looking at the DXY chart, one can see that the index is following the recovery path from a huge decline last 2020. In this recovery, the primary prospect is the area of 94.00/94.50, where the quote will move soon.
It should be recalled that the dollar index (DXY) is the ratio of the US dollar to a basket of six currencies. So if the index grows, this will serve as a signal for the growth of the greenback.
Now, let's talk about traditional currency pairs.
If we analyze the trading chart of EUR/USD pair, the first thing that can be seen is the breakdown of the two-day side range of 1.1760/1.1805, which stressed traders last March 26 and 29. As a result, the expectation for a downward interest led to the prolongation of the decline, which was already expected.
Meanwhile, the GBP/USD pair managed to break through the variable pivot point of 1.3750, which restrained sellers over the previous days. The downward activity led to the recovery of the volume of short positions relative to the growth from 1.3669-1.3845, where sellers had a real chance to continue the correction from the high of the mid-term trend: 1.4224 ---> 1.3669.
Based on the above-mentioned charts, the US dollar is doing quite well.
The United Kingdom already published its GDP data for the fourth quarter today, where there was an economic growth of 1.3%. In annual terms, the rate of decline slowed down from -10.3% to -7.3%.
The pound sterling reacted positively to the GDP data by making an upward move.
In turn, France published its inflation data, which rose from 0.8% to 1.4%. At 9:00 Universal time, the general inflation rate for the whole Europe will be published, which will definitely interest many traders. The initial forecast for EU inflation was 1.2%, from the level of 0.9%. However, it is possible that it will grow to 1.3% due to the recent changes in the Euroblock.
The EUR/USD pair trading chart shows that during the decline, the quote approached the level of 1.1650 from the range level (1.1600/1.1650/1.1700), which traders consider as a pivot point. A reduction in the volume of short positions is considered normal, which allows for stagnation-pullback stage relative to this area.
It is worth noting that downward interest is still relevant in the market, but given this level, subsequent sell positions will be considered by traders as a step-by-step move.
This will initially be considered once the price is kept below the level of 1.1700 in the H4 chart, with the aim of moving to 1.1650-1.1600.
There will be a drastic change in the market if the price is kept below the level of 1.1600 in the daily chart, which will question the mid-term upward trend.
As for the trading chart of the GBP/USD pair, we can see that market participants came to the mirror support level of 1.3700 while restoring the downward interest. This is where a slowdown in activity was observed. Relative to this coordinate, there was a reversal, which returned us to the area of the previously broken level.
To continue the downward activity, it is necessary for the quote to stay below 1.3750, which will eventually lead to an increase in the volume of short positions and movement towards the range of 1.3700-1.3680.
Traders will consider an alternative scenario of the market development if the price is held above the level of 1.3750 in the H4 chart, which may lead to an amplitude of 1.3750/1.3800.
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