On Thursday, the 10th of August, the euro/dollar pair closed up at 1.1773. Data on industrial inflation and threats from Donald Trump directed towards North Korea put the dollar under pressure. A fall on the producer price index has reduced the probability of there being another interest rate hike from the Fed before the year is over. Fuel was added to the fire by Fed member William Dudley, when he expressed doubts that the US’s mid-term inflation target might not be reached within the year.
The producer price index in the US for July fell by 0.1% (forecast: 0.1%, previous: 0.1%). The producer price index excluding food and energy for July fell by 0.1% (forecast: 0.2%, previous: 0.1%).
The war of words between Pyongyang and Washington is escalating. Trump has threatened to meet North Korea "with fire and fury like the world has never seen". The North Korean military has announced detailed plans to fire 4 mid-range ballistic missiles towards the US territory of Guam as a “warning” to the US
Day’s news (GMT 3):
- 09:00 Germany: CPI (Jul).
- 15:30 USA: CPI (Jul), CPI core (Jul).
- 16:40 USA: Dallas Fed president Kaplan’s speech.
- 18:30 USA: Minneapolis Fed president Kashkari’s speech.
EURUSD rate on the hourly. Source: TradingView
The dollar’s rise was halted by the US’s PPI report. From a low of 1.1704, the rate restored to the 67th degree. Sharp rebounds from 1.1689 and 1.1704 have formed a W-model on the hourly timeframe, and two pin bars on the daily. The pin bar is a reversal formation, so because of the conflict between the US and North Korea, as well as the rise in the price of gold, I think that according to the W-model, it’s more logical to expect the euro to strengthen against the dollar.
I’m not expecting a particularly strong rise in quotes. In my forecast, I think that an upwards triangle will form with a target of 1.1808/12. The 90th degree and trend line run through here. The CPI report in the US could nullify this scenario. If the data shows a rise in consumer inflation, euro bulls will be unlikely to be able to return to the trend line. A strong report would push buyers back to 1.1711. High volatility is expected on all markets leading up to the weekend.