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US Inflation in the Spotlight: Will it Sink the Dollar and Boost the Euro?

US inflation dollar euro

Explore the impact of US inflation on the dollar and Euro in this analysis of market trends and potential currency shifts.

In the current financial landscape, the Euro (EUR) remains closely tied to the impending release of US inflation data, with the EUR/USD pair navigating the market dynamics. Here’s a comprehensive analysis of the EUR/USD forecast, prices, and recent developments.

Core and Headline Inflation Trends

Recent data points to a disparity between core and headline inflation. While core inflation is experiencing a decline, headline inflation is on an upward trajectory. The focus is on the US Consumer Price Index (CPI), scheduled for release today at 13:30 UK time. Analysts expect this event to inject volatility into a relatively quiet foreign exchange (FX) market, shaping the tone for the financial landscape in the early part of the year.

Headline inflation (year-on-year), currently at a five-month low, is expected to increase by 0.1% to 3.2%. This increase results from persistent energy prices while projecting a decrease in core inflation (year-on-year) from 4.0% in November to 3.8%, adding nuance to the overall economic picture.

US Inflation in the Spotlight: Will it Sink the Dollar and Boost the Euro?

EUR/USD Analysis

EUR/USD is trying to climb in anticipation of the upcoming US data. The display shows a consistent pattern of higher lows and higher highs since early October, signifying a positive trend. Executing a trade above the December 28th high at 1.1138 is essential to maintain this momentum.

In early January, the Golden Cross provided a supportive backdrop, and the Commodity Channel Index (CCI) indicator positioned itself in neutral territory. A confirmed break above the 20-day simple moving average, presently at 1.0981, is crucial for further upward momentum toward the 1.1075-1.1100 zone.

Retail Trader Sentiment

Insights from IG retail trader data disclose that 43.22% of traders are currently net-long, with a short-to-long ratio of 1.31 to 1. Notably, net-long traders have decreased by 12.07% from yesterday and 15.16% from last week. Conversely, net-short traders have increased by 10.15% since yesterday and 19.62% since last week.

EUR/USD Bullish Outlook

Clients are leaning towards a bullish stance on EUR/USD, with 55% currently net short. Statistics indicate a 10% decrease in long positions, an 8% increase in shorts, and a negligible change in open interest. Weekly figures show a 4% reduction in longs, a 17% surge in shorts, and a 7% increase in open interest.

As the market awaits the US inflation data, the EUR/USD pair remains a focal point, with traders closely monitoring key technical levels and market sentiment for potential shifts in the currency pair’s trajectory.

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