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FX.co ★ 30.11.2022: Traders’ reaction to unexpected slackening in Europe’s price growth. EUR/USD and GBP/USD

30.11.2022: Traders’ reaction to unexpected slackening in Europe’s price growth. EUR/USD and GBP/USD

The euro is keeping its positions against the US dollar amid a possible change in the ECB’s and Fed’s monetary policies. Speculations about the issue are becoming more intense amid the macroeconomic data from Europe.

Yesterday, Spain and Germany disclosed their preliminary inflation reports, which unveiled a more considerable decline than expected. Thus, it was quite predictable that the eurozone inflation figures would be below the forecast. Even in France, which published its inflation data early today, the situation turned out to be better than expected.

Optimistic predictions met reality. Thus, the eurozone inflation slackened to 10.0% from 10.6% per annum for the first time since June 2021. Economists had foreseen a decline to just 10.3%. Nevertheless, traders showed a modest reaction.

Notably, lower inflation points to possible slackening in the key interest rate hike by the ECB. The central bank will hardly alter its policy in December, but it may do this early next year. It means that the ECB’s key interest rate is unlikely to exceed the Fed’s one. Such a possibility was the main driver of the euro’s rise in the recent month. Notably, the growth was so considerable that the US dollar was losing value against almost all the currencies.

It seems that investors are waiting for comments from representatives of the European Central Bank. If they just drop a hint about a change in the pace of the key interest rate hike, the euro may slump towards the parity level.

Yesterday, the euro/dollar pair showed an insignificant decline. It approached the control level of 1.0300, which is acting as support at the moment.

Under the current conditions, the control levels are located at 1.0300 and 1.0500. The pair is hovering between these levels. It is quite possible that the price’s settlement beyond either limit on the four-hour chart will indicate its future direction. Thus, traders may choose a rebound strategy.

Meanwhile, the pound/dollar pair was hovering in the lower limit of the psychological area of 1.1950/1.2000. This area could be considered as support.

If the price settles below 1.1950 on the four-hour chart, the downward cycle, which began later last week, will continue. In the event of this, the pound sterling may slide to 1.1750.

The upward scenario will become possible if the price consolidates above 1.2050 on the four-hour chart. In this case, the quote may return to the recent local high located at the resistance level of 1.2150.

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*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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