The strong rising trend in the EUR/USD pair was stopped 10 days ago. Now there is a consolidation in the market. Recently we made an interesting assumption. The end of the trend may have been affected by the decline of new COVID-19 cases in the USA and their increase in Europe. However, new factors have been added this week.
On Wednesday, the US consumer price index data for July was released. It turned out to be much higher than expected. Inflation has already accelerated to 1.6% per annum. At the same time, a similar consumer price index in Germany is 0%.
What does it say? Sooner or later the Fed will have to do something about inflation, it may reach 3% or even 5%. Interest rates, of course, will not rise for a long time. On the other hand, it will be possible to remove excess cash liquidity from the market. As always, it will lead to a shortage of dollars and increased demand for them.
But in Europe, from this point of view, everything is good. There’s virtually no inflation. So the EU Central Bank can continue to pump the economy with new money. But everything can change very quickly.
Therefore, there is a strong risk that the price will quickly return to 1.15.
Oil has been in a narrow range for 2 months now. This is not typical of such a volatile asset. At the moment the demand is balancing the supply.
Black gold is affected by 2 factors:
• Risk of a second wave of coronavirus with the onset of autumn in Europe and Asia. In this case, mass quarantine measures, closures of cities and entire countries are again waiting for us.
• The hope is that soon the world will get the vaccine, people will be vaccinated, which means that the demand for travel will again increase dramatically, closed production facilities will be thawed, etc.
Which of these factors outweighs? We don’t know. The main thing to remember is that reduced volatility is always interrupted by explosive movements, as was the case recently with Bitcoin.
What’s waiting for us today?
04.00 Retail sales in China for July
11.00 EU GDP for 2nd quarter
14.30 US retail sales for July
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