Inflation Panic Grips Markets
2022.06.14 11:41
The market is still digesting the US inflation results published on Friday. Intense panic took over the market amid various gloomy and apocalyptic forecasts. It instantly fuelled speculation about the possibility of a rate hike by 0.75% or even 1.00%.
The FOMC meeting will start already tomorrow. Yet, the market is not fully prepared for an aggressive move. Since Friday, investors have been preparing for a larger than 0.50% increase in interest rates. In addition, global recession risks and inflationary pressures are growing. So, it is unclear what can be done in such a situation.
In the meantime, amid a massive fall in the euro, the market is now in need of a correction. In theory, it should have occurred yesterday. However, amid all this talk about the possibility of a 1.00% increase in the interest rate, nothing happened. Above all else, the macroeconomic calendar is empty. Anyway, macro data are now of little interest. Therefore, the euro may well retrace up today.
Technical Outlook
Amid a steep drop in EUR/USD, a row of important price levels has been broken. As a result, the euro lost more than 300 pips in three days. Meanwhile, the dollar retraced up by 89%.
The Relative Strength Index (RSI) is below the mark of 17.76 on the 4-hour chart, which indicates that the euro is heavily overbought. Therefore, a technical correction or a flat is likely. On the daily chart, the indicator is moving in the range between 30 and 50.
EUR/USD price chart.
The crossover of the Alligator’s MA’s on the 4-hour chart signals to sell the euro. On the daily chart, a downward reversal of the indicator shows the end of the corrective stage.
The price is approaching the starting point of the recent corrective move, which may cause a decrease in the volume of short positions and a technical correction.
The volume of short positions will likely increase after consolidation below 1.0350 on the 4-hour chart. In terms of complex indicator analysis, there is a buy signal for short-term trading and a sell one for intraday and medium-term trading.
