Inflation in Europe fell, but not as much as expected. Only from 8.6% to 8.5%, whereas it was forecasted to fall to 8.4%. And supposedly, this was supposed to strengthen the single European currency, because it means that the European Central Bank will slow down interest rate hikes, if at all, much slower than it was expected. However, the euro did not rise, instead it fell. Though slightly. The main reason for that was the labor market data. Of course, as expected, the unemployment rate remained unchanged. Only the previous data was revised upwards. As a result, the unemployment rate was 6.7%, not 6.6%. And a high unemployment rate requires the easing of monetary policy.
Unemployment rate (Europe):
Another factor that weakened the single currency was the U.S. unemployment claims report. In particular, the number of initial claims went down by 2,000, and the number of continued ones by 5,000. Although, in fact, the number of repeated applications increased by 1,000, as the previous results were revised upwards. Still, the data was better than predicted.
Jobless claims (United States):
Services PMIs and Composite Indexes will be released today. But this data will not affect anything as it is about the bottom line. The markets have already put these figures into the current quotes at the time of release of the preliminary assessments. So the only thing worth paying attention to today is the Producer Price Index in the euro area. Especially since the rate of producer price growth should slow down from 24.6% to 19.0%. This will be another warning of impending monetary policy easing by the ECB and will further weaken the euro.
Producer Price Index (Europe):
The EUR/USD continues to lose ground in the market, due to which the quote fell below 1.0580. The bears practically won back the pullback from 1.0500, which took place since the beginning of the week. This indicates the bearish mood among market participants.
On the four-hour chart, the RSI downwardly crossed the 50 middle line, thus reflecting bearish sentiment among traders.
The Alligator's MAs are intertwined in the 4-hour time frame, which indicates stagnation in the pullback cycle. In the daily time frame, the Alligator's MA's are still heading down, MA moving lines are directed downwards.
Outlook
In case the price stays below 1.0550 in the four-hour chart, there is a high probability of a breakdown of the support level of 1.0500. This can maintain the downward cycle from the beginning of February.
In order to execute the bullish scenario, the price needs to climb above 1.0650 and settle on the daily chart.
The complex indicator analysis unveiled that in the intraday and short-term periods, technical indicators are pointing to bearish sentiment since there is a recovery of short positions due to the recent pullback.
