Since early trading hours on Friday, the single European currency was losing ground. Such a dynamic confounded the revised manufacturing PMI for the Eurozone. In a flash estimate, the manufacturing PMI dropped from 54.6 to 52.0 whereas the revised PMI declined a bit less to 52.1. Nevertheless, the market neglected this data, being focused on the preliminary inflation data.The CPI was expected to accelerate to 8.3% from 8.1%, but the actual score happened to be much worse as the CPI surged to 8.6% in annual terms. Thus, inflationary pressure has been escalating. It means that a rate hike at the nearest ECB policy meeting will not be enough to push soaring inflation down. In other words, the ECB lags behind in taking counter-measures against rampant inflation.
EU CPI, y/y
In the early New York trade, the single European currency began its step-by-step growth. That alsodefied the expected response to the data. Judging by the flash estimate, the US manufacturing PMI should have contracted from 57.0 to 52.4. The revised data logged a more moderate decrease to 52.7. In fact, the euro's growth comes as a result of a technical bounce following a significant decline.
US Manufacturing PMI
Today the economic calendar reminds us of data on EU factory inflation. The EU PPI should have dropped from 37.2 to 36.9. It suggests that consumer inflation will quickly follow suit. Analysts foresee a dip in consumer prices in the near future as the headline inflation has already skyrocketed to incredible peaks. So, its downward trajectory is a question of time. Perhaps it will happen not until the autumn. Therefore, the PPI data which is due today will come as no surprise. Moreover, American markets are shut today on the occasion of the national holiday, Independence Day. It means a holiday-thinned market that is likely to consolidate at Friday's levels.
EU PPI, y/y
In the course of the intense downward move, EUR/USD closely approached the bottom of the downtrend line. It assured traders to cut on short positions that slowed down a downward cycle. The price rebounded in response.
The H4 and D1 RSI technical instrument is moving in the lower border of 30/50. It indicates thatmarket participants are still poised to sell EUR/USD.
Moving averages on the H4 and D1 Alligator are directed downwards in line with the direction of the overall trend.
Outlook and trading tips
The sellers are facing support in the area of 1.0320/1.0350. Short positions come under pressure in this area. We assume oscillations at around support accompanied by technical retracements. The currency pair will be able to break the lower border after the price settles below 1.3020 at least on the 4-hour chart.
Complex indicator analysis generates a buy signal for short-term trading amid the ongoing technical retracement. Indicators signal the overall downtrend for intraday and medium-term trading.