EUR/USD, GBP/USD, and USD/JPY Analysis: US Dollar Weakens after Inflation Data


The US dollar weakened after data showed US consumer price inflation in December exceeded economists' expectations. This has raised some doubts that the Fed will cut rates. US consumer prices rose in December as inflation continued its upward trend, rising 0.3% for the month and 3.4% year-on-year, versus economists' forecasts of 0.2% and 3.2%, respectively. Cleveland Fed President Loretta Mester said it would be too early to cut rates in March, while Richmond Fed Chairman Tom Barkin said rising inflation was too narrowly focused on goods. American monetary authorities will probably be in no hurry to launch a cycle of lower borrowing costs this year. Against this background, expectations regarding a March adjustment to the value have been revised, but in general such a scenario is still considered possible. Today at 15:30 (GMT+2), the focus of investors' attention will be on statistics from the United States on manufacturing inflation: the producer price index is expected to increase in December from 0.9% to 1.3% in annual terms and from 0.0% to 0.1% per month.


Quotes of the EUR/USD pair are holding near the 1.0975 mark, preparing to end the week with slight upward dynamics. According to EUR/USD technical analysis, immediate resistance can be seen at 1.1000, a break higher could trigger a move towards 1.1045. On the downside, immediate support is seen at 1.0958, a break below could take the pair towards 1.0910.

Trading participants are closely monitoring comments from ECB representatives. Board member of the regulator Isabel Schnabel said yesterday that indicators of economic sentiment in the region have probably reached minimum values, while the short-term economic prospects remain weak. The official also noted that the labour market remains resistant to changes made by the regulator, but a return of inflation to the target level of 2.0% in 2025 is still possible. During the day, data on consumer price indices will be published in Spain and France, which may remain at 3.1% and 4.1%, respectively.

The same trading range with boundaries of 1.0875 and 1.1000 remains. Now the price has moved away from the upper limit of the range and may continue to decline.


On the GBP/USD chart, the pair is trading in an uptrend during the morning session, developing bullish momentum in the short term. The pound is testing the level of 1.2775 for a breakout upward, updating local highs from December 28. Immediate resistance can be seen at 1.2770, a break higher could trigger a rise towards 1.2826. On the downside, immediate support is seen at 1.2673, a break below could take the pair towards 1.2610.

The focus is on British statistics on gross domestic product (GDP): on a monthly basis, the indicator adjusted from -0.3% to 0.3%, and on an annual basis - from -0.1% to 0.2%. In turn, the trade deficit amounted to 14.19 billion pounds after 15.94 billion pounds a month earlier, and industrial production increased from -1.3% to 0.3% month-on-month and from -0.5% to -0.1% per annum, signalling a systematic recovery of the national economy.

The trading range changed slightly at the end of the week. The upper limit moved to 1.2783, and the lower limit to 1.2673. Now the price has rebounded from the upper limit of the range and may continue to decline.


On the USD/JPY chart, the pair is showing a fairly active decline, developing a correction signal formed the day before. The dollar is testing the 145.00 mark for a breakdown downwards. Strong resistance can be seen at 146.40, a break higher could trigger a rise towards 147.00. On the downside, immediate support is seen at 144.83. A break below could take the pair towards 143.40.

Macroeconomic statistics from Japan provide some support for the yen today: bank lending volumes accelerated from 2.8% to 3.1% in December, and the current situation index from Eco Watchers strengthened from 49.5 points to 50.7 points, exceeding the expected 49.9 points.

At the highs of the week, a new ascending channel has formed. Now the price is near the lower border, from where it may continue to rise.

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