The Euro showed a spate of resistance in yesterdays trading session, bouncing back sharply from an earlier selloff, on the back of better than expected inflation numbers from the US which shows the market is not convinced that rate hikes from the US Federal Reserve are on the horizon.
Consumer prices in the US for the month of May, hit their highest levels in almost 13 years as inflation begins to take hold in the American economy. The Consumer Price Index, which represents a basket of different things including food, energy and general housing costs hit the market at a whopping 5% against analyst’s expectations for a figure of 4.7%.
The news initially sent the US dollar surging against all the major currencies before pulling back as the market digested the news and how the Fed may react to such figures.
Even though the inflation readings seem sky high, it is widely believed that the Fed will overlook these figures and see them as a temporary consequence of the coronavirus which crashed the US economy. As a result, many in the market believe the US central bank will not factor these latest numbers into their decision making when the Federal Open Market Committee meets next week to discuss monetary policy.
This is good news for the Euro as any good economic news from the US is likely to be brushed off in the coming months as temporary and not put the European currency under too much pressure.
The support and the resistance lines for the Euro which began on Thursday has remained firmly intact and the bulls will be looking for a clean break of the resistance line and a run up to the next critical level which was the high of $1.2224 reached on the 31st of May.
There was an attempt to reach that level on Wednesday, but it was quickly rejected which means it is going to take some momentum to hit this target again and news filtering out of the G7 in the UK by world leaders may be just the trigger.