The Euro currency received a boost to rise on the wave of inflation data as it's basic value has increased. This prompted market players to raise the main currency pair to a new local maximum.
Despite the overall inflation value, the overall inflation value has remained the same at 1.3% level in annual terms. Its base value increased to 1.2% from 1.1%, which was the reason for the resumption of euro purchases against the US dollar. An additional negative factor for the dollar is weak inflation that pushed investors to believe that this may be the reason for the U.S. Federal Reserve to raise interest rates by the end of this year. Another negative is the unhealthy political climate in the United States. The replacement of the health insurance program, known as Obamacare, failed on Friday which showed the market once again the weakness of D. Trump and his administration. Additionally, this includes his opponents who are not only in the camp of the Democratic Party, involving the Republican as well.
Hereinafter, we believe that prior to the Fed decision to begin in reducing the balance, unless the inflation data shows growth, the US dollar will remain under pressure primarily against the euro and the yen. The actual decline of the euro is due to market expectations that the ECB will already announce the termination of asset purchases in 2018 in September. In relation to the yen, the dollar's decline may continue due to the disagreement between D. Trump of the American establishment and the president.
Today, the market will focus on the release of the preliminary data on the eurozone's GDP for the second quarter. The expected growth will be 0.6% in quarterly terms and 2.4% against 1.9% in annual terms. If the data does not disappoint, some correction is expected to continue the main currency pair of EUR/USD rally towards 1.1900. Other than that, there will also be figures on employment in Germany which are assumed that the unemployment rate will remain at the same level of 5.7%.
Forecast of the day:
The EURUSD pair is consolidating around the level of 1.1800. On the wave of positive data on GDP, it may continue to rise to 1.1900 but with a minor correction to 1.1745 which highly occur when the price falls below the level of 1.1800. However, it will most likely be bought again on the wave of the general weakness of the dollar added by the expectation of the elimination of incentives from the ECB in 2018.
The USD/JPY pair is trading above the level of 110.00 and the price actually lies on the support line of the lateral trend. The reason for the strength of the yen is the weakness of the dollar and nothing more. Therefore, maintaining this state of affairs can lead to a breakout in the level of 110.00 which could happen after a slight correction to 110.65 or when the pair immediately moved towards 109.25.