Markets are poised for more moves in financial markets over the next few sessions as fundamental updates are released alongside a continuous stream of geopolitical updates on the Middle East. For the moment news from the Middle East is likely to dictate the major short term moves in FX, but fundamental updates out of the US this week will have a big say in the medium term and long term moves in the dollar.
We have major inflation numbers out of the US this week with both the CPI and PPI data due out and although the CPI will probably capture the initial reaction earlier in the week and big surprises in the PPI numbers released on Wednesday could see more impact on the majors. The headline month-on-month PPI number is expected to show a 0.5% increase while the more stable Core data is expected to come in with a 0.3% increase, with both indicating more inflationary pressure on the US economy. If these numbers reinforce a strong CPI print on Tuesday, then we could see topside moves in the dollar start to pick up, whereas if we see weaker prints, traders are expecting to see more weakening for the greenback.
The Euro is sitting near range highs and a weaker print, which will probably be more of a surprise to the market given the current environment could see it break through resistance near 1.1800 to challenge the key psychological level at 1.2000. However, stronger numbers, especially if coming in line with strong CPI data and increased geopolitical tensions should see the dollar drive higher and Euro break back down through support levels around 1.1730 to push back into levels seen throughout April.
Resistance 2: 1.1848 – April High
Resistance 1: 1.1790 – Trendline Resistance
Support 1: 1.1727 – Trendline Support
Support 2: 1.1682 – 200 Day Moving Average
