The US CPI figures being within expectations created a quandary in the market, as the dollar oscillated between movements in response and after the report. Looking at the EUR/USD price activity would lead one to see the report as being on the gentler side.
If you’re basing your trades on the data, that could cause real problems because the market was wavering in the hours following the significant risk event.
In the end, the dollar weakened as expectations of a more vigorous Fed diminished, with some segments of the market now predicting a 25 basis point rise in the rate instead of the former prediction.
Currently, I think that the dollar is being affected the most when compared to the euro and the yen. Let’s investigate.
Yesterday, the EUR/USD pair managed to break through the 1.0700 resistance level and even 1.0800. This paves the way for the 50.0 Fibonacci retracement level of the swing lower from 2021, which is 1.0942. This is before it reaches the next significant psychological resistance at 1.1000, which many traders have their eyes set on after yesterday.
The USD/JPY experienced a sharp decline below 130.00, which was its least value since June 1. This significant decrease could be attributed to speculations concerning the Bank of Japan, and it’s not likely that the recent CPI data was the central cause of the pair’s large shift yesterday.
The downward trend was maintained from Asia, with fears increasing that the Bank of Japan could possibly make alterations or at least make a statement about adjusting policy at their gathering the following week.
From a technical viewpoint, the break below 130.00 looks promising for sellers, as they are hoping for a further decrease to May’s lows at 126.55-65, with the 125.00 mark being a noteworthy benchmark to be aware of.