- Donald Trump continues to attack the Fed.
- US Dollar Index finds support near 95, looks to close in the red.
- Inflation figures from the U.S. miss expectations.
The EUR/USD pair took advantage of the broad-based USD weakness on Thursday and advanced to its highest level since October 1 at 1.1600. Although the pair failed to extend its gains in the last couple of hours, it remains on track to close the third straight day with gains as it trades near 1.1560 while adding 0.35% on the day.
The monthly inflation published by the U.S. Bureau of Labor Statistics on Thursday revealed that the CPI rose 0.1% on a monthly basis in September and the annual rate fell to 2.3% from 2.7% in August to miss the analysts' estimate of 2.4%. Further details of the report showed that the core CPI, which excludes food and energy prices, remained steady at 0.1% and 2.2% on a monthly and yearly basis, respectively. After slumping to 95 with the knee-jerk reaction to the data, the US Dollar Index retraced a part of its losses and was last seen down 0.22% on the day at 95.25.
"The Fed is not pursuing inflation, it is not seeking to damp an overheating economy. It is chasing a 'normal' rate environment and will continue to do so as long as economic growth holds up," FXStreet Joseph Trevisani said on today's CPI numbers.
Meanwhile, the U.S. President Donald Trump continued to criticise the Fed's monetary policy decisions. In an interview with Fox TV, Trump argued that the Fed was too aggressive with rate hikes and was making a big mistake. Later in the day, Trump also stated that he had no desire to fire Chairman Powell and added that he was disappointed.
Earlier in the day, the European Central Bank (ECB) policymaker and the head of the Bank of Finland, Olli Rehn, said that the core inflation in the euro area was still rather weak and the accommodative policy was still needed.
Technical outlook via FXStreet Chief Analyst Valeria Bednarik
According to technical readings in the 4 hours chart, as indicators resumed their advances, maintaining their strong upward slopes near overbought levels. In the same chart, the 20 SMA keeps gaining further upward traction below the current level. A major resistance area comes between 1.1610 and 1.1620, where the pair has the 50% retracement of its latest decline, also a mild bearish 100 SMA in the mentioned chart, while the 200 SMA holds a few pips above the 100 SMA. A break through the level should see a further unwinding of USD longs and push the pair up to the 1.1660 region.
Support levels: 1.1570 – 1.1527 – 1.1490.
Resistance levels: 1.1620 – 1.1660 – 1.1705.