If yesterday, the market was literally marking time, then today, the US dollar began to gradually lose its position from the very opening of the Asian session. This process is exclusively speculative. The fact is that even on Friday, its weakening was not justified by anything, so a pullback is inevitable. Today, everything will depend on the inflation data in the euro area, which may accelerate from 2.2% to 2.7%. Such a strong rise in inflation amid growing concerns about global price increases will scare investors. After all, a high level of inflation may well undermine the recovery of the European economy, which has just begun.
Moreover, the Fed, being in a similar situation, is already preparing the market for certain steps designed to improve the condition of the economy. Meanwhile, the European Central Bank continues to pretend as if nothing terrible is happening, and this worries market participants. If the European regulator will announce any measures quite suddenly and unexpectedly, the market may not be ready for this development. Thus, rising inflation in Europe will inevitably lead to a rise in the US dollar. It should be noted that the observed dollar weakening is a classic buy-by-rumor, sell-by-fact pattern. As a result, its subsequent growth will simply be much larger.
Inflation (Europe):
The EUR/USD pair continues its growth despite the high overbought level. It is assumed that we are dealing with the inertia of speculators. This is a local manifestation in the market, which can ultimately lead to a sharp change in trading interests. The downward trend cycle from early June is still relevant in the market, despite the scale of the correction.
The GBP/USD pair reached the level of 1.3800 following the correctional pattern of August 20. The high overbought levels paired with resistance levels can lead to a decrease in long positions and a reversal.
