The index of economic sentiment in the eurozone in May came out yesterday with an increase (37.7 against the forecast of 37.2 and 35.1 in April), which indicates an improvement in investor sentiment regarding economic growth in the region.
Nevertheless, according to the updated data released today, inflation in Germany in May, whose economy is the locomotive of the entire European economy, has slowed sharply. This will support investors' expectations that the ECB will not rush to wind down the stimulus program. Harmonised annual inflation of consumer prices in Germany in May fell to 1.4% from 2% in April. Thus, inflation in the largest economy of the eurozone is much behind the ECB target level, which is just under 2%.
Today at 09:00 (GMT) updated data on industrial production in the eurozone for April will also be published.
However, all the market's attention today will be directed to the Fed's decision on the interest rate, which will be published at 18:00 (GMT). It is widely expected that the Fed will raise its key interest rates by a quarter of a percentage point to 1.25%. The probability of this decision is estimated by investors in 100%, therefore it is already taken into account in the prices. The most interesting will be the press conference of the Fed, which will start at 18:30 (GMT).
If the Fed signals about the suspension of tightening monetary policy, the US dollar will be under pressure. The Fed could alert the recent slowdown in US inflation. Nevertheless, the strong growth of the US stock market and the general weakening of the dollar in the foreign exchange market make the decision to raise the rate less painful for the Fed.
If the Fed signals about the possibility of raising the rate one or two more times this year, the dollar will rise sharply in the foreign exchange market.
Also from the news for today is to pay attention to the block of the most important macro data from the US, which is published at 12:30 (GMT). Among the published data - inflationary indices (retail sales and consumer price index for May). Nearly zero growth in May is expected (+ 0.1% and + 0.0%, respectively), which again indicates a slowdown or a very weak inflation rate in the US.
On the eve of today's publication of the Fed's decision on the rates, the dollar is under pressure in the foreign exchange market, including the EUR/USD pair.
At the beginning of today's European session, the EUR/USD pair remained on the balance line 1.1215 (EMA200 on 1-hour and EMA50 on the 4-hour chart). At the same time, the pair remained in the ascending channels on the 4-hour, daily, weekly charts. The positive dynamics of the EUR/USD pair remains. Only in case of breakdown of the support level 1.1100 (200-period moving average on the 4-hour chart) can one start to consider short positions on the currency pair. In case of breakdown of the local resistance level of 1.1230 (June highs), the pair will move towards recent annual highs near the level of 1.1280 (Fibonacci level of 23.8% of corrective growth from the lows reached in February 2015 in the last wave of global decline from 1.3900 level) and further to the level of 1.1340 (EMA144 and the upper limit of the ascending channel on the weekly chart).
Support levels: 1.1180, 1.1165, 1.1120, 1.1100, 1.1080, 1.1000, 1.0950, 1.0890
Resistance levels: 1.1230, 1.1280, 1.1340, 1.1600
Trading recommendations
Sell Stop 1.1185. Stop-Loss 1.1235. Take-Profit 1.1165, 1.1120, 1.1100, 1.1020, 1.1000, 1.0950, 1.0900
Buy Stop 1.1235. Stop-Loss 1.1185. Take-Profit 1.1280, 1.1300, 1.1340, 1.1400, 1.1600
