Technical Analysis

EUR/USD Trades Near Parity After U.S. PPI Data

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    The shared currency is up on Wednesday, trading near parity against a weaker greenback after U.S. PPI data showed a decline in producer inflation in August.

    At the time of writing, the pair trades at 0.9995, with modest gains of 0.28%, after peaking at a daily high of 1.0023 earlier in the session.

    The U.S. Bureau of Labor Statistics released August Producer Price Index data. The eased to 8.7% YoY from its previous reading of 9.8% and slightly below the 8.8% expected.

    Meanwhile, the inflation (which excludes energy and food volatile items) slowed to 7.3% YoY from July’s 7.7%, still above expectations of 7.1%.

    After an impressive rally on Tuesday, the gained more than 1.5%, and the DXY trades with modest losses near the 109.50 area as the bond yields eased.

    Ahead of next week’s meeting, market participants expect the Fed to continue its contractive cycle at a faster pace. The WIRP tool shows that a 75 bps hike is already priced in and that investors are betting on 34% odds of a 1% interest rate increase.

    No Fed officials will be on the wires until next week, and with most relevant data already behind, the U.S. bond yields and risk sentiment will dictate the pace of the markets for the rest of the week.

    According to the daily chart, the EUR/USD short-term technical outlook remains bearish, although downward momentum is fading.

    The RSI holds a positive slope below its midline, while the MACD prints lower green bars.

    On the downside, the following two critical support levels stand at the 0.9900 mark and the cycle low of 0.9863.

    To regain traction, the bulls must secure the parity level to advance to the 1.0100 psychological mark and then to the 1.0180-1.0200 zone, where a descending trendline is defending the psychological level.

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