Technical Analysis

Euro Falls As Inflation Jumps

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    The euro is showing limited movement today, after a two-day rally. In the European session, is trading at 0.9759, down 0.55%.

    It has been a week of swings for the euro, which has traded in a 300-point range. The euro has been under strong pressure, and is down 2.5% in September, as the euro continues to drop further away from the psychologically-important parity line.

    Eurozone inflation hits 10%

    The number 10 is not at all pretty when referring to , but that is today’s story, as eurozone CPI jumped to 10.0% in August, up from 9.1% in July and above the consensus of 9.7%. This is the highest rate ever recorded since the euro was introduced back in 1999. Inflation is well supported, as all broad categories reflected price increases, and rose to 4.8%, up from 4.3% and higher than the 4.7% estimate. Germany, the powerhouse of the bloc, saw accelerate even higher, to 10.9%.

    The chief driver of soaring inflation is energy prices, which have skyrocketed as Russia has sharply reduced energy exports to Europe. The latest ominous development was a series of explosions at the Nord Stream pipelines this week. Although the pipeline system had already been shut down, the explosions, which were likely sabotage, have sent prices even higher.

    The ECB showed up very late to the rate-tightening dance, and the current benchmark rate of 1.25% lags behind other central banks and will not have much impact on soaring inflation. The central bank appears to have little choice other than to deliver a second-straight rate increase of 0.75% at the October meeting.

    With eurozone inflation hitting double digits and showing no sign of peaking, it is no surprise that confidence levels are sinking among consumers and businesses. The European Commission economic sentiment index slipped to 93.7 in September, down from 97.3 in August. German fell to -42.5 in September, down from -36.8 in August, and lower than the consensus of -39.0 points. The economic picture in the eurozone is bleak, and the ailing euro will be hard-pressed to make any headway against the surging .

    EUR/USD Technical

    EUR/USD is testing support at 0.9554. Next, there is support at 0.9419
    There is resistance at 0.9640 and 0.9711

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