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The EUR/USD is trading sub-1.16 ahead of the US PPI inflation report, which is scheduled to be released during the NY session. The PPI data is one of the ways the Fed measures inflation. In all likelihood there would need to be a big change from consensus for the Fe to deviate from its very consistent forward guidance on rate hikes.
According to general consensus, the producer price index for the previous month is expected to come flat at 0.3%. The June inflation increase was a six-year high in the wholesale cost of goods and services. The Core PPI inflation reading is expected to inch lower to 0.2%, down from 0.3% in June. The year-on-year inflation reading also increased 3.4%, but according to the market consensus we should expect the PPI inflation to cool off in July.
The high inflation is a reflection of a fast-growing economy and supports the Fed’s tightening approach. If the prices continue to move up at the same rate it will embolden the Fed to hike rates more aggressively.
(Source: LCG MT4, 9/8/2018)
The EURUSD technical pattern remains bearish as long as we trade below key resistance level 1.1750, which is also the top of the current trading range. Below the current market price the support level 1.1530, which is also the low of the week has the potential to hold the downside. The line in the sand remains the big psychological number 1.1500.
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