Amid easing inflation in the US and softer rhetoric surrounding trade relations with China, the US dollar has strengthened against major currencies, including the yen and the euro. Inflation data released yesterday came in below analysts’ expectations, which would typically put downward pressure on the dollar. However, the market responded differently this time: the decline in inflation was interpreted as a sign of economic resilience, reducing the urgency for the Federal Reserve to cut interest rates. Additional support for the dollar came from news that the Trump administration had reached an agreement with China to temporarily delay the introduction of new trade tariffs.

EUR/USD

Earlier this week, sellers in the EUR/USD pair managed to extend the downward correction, testing key support around the 1.1100 level. EUR/USD technical analysis suggests a potential return of upward momentum, as a bullish harami candlestick pattern has formed on the daily EUR/USD chart. If the price falls below 1.1070, the pair may test the 1.1000–1.0950 range.

Events that may influence EUR/USD pricing:

• Today at 09:00 (GMT+3): Germany’s Consumer Price Index (CPI);
• Today at 10:00 (GMT+3): Spain’s Consumer Price Index (CPI);
• Today at 11:15 (GMT+3): Speech by Bundesbank President Joachim Nagel;
• Today at 19:00 (GMT+3): Speech by Bundesbank Executive Board Member Burkhard Balz.
  

USD/JPY

As expected, the USD/JPY pair continued to rise following last week’s Fed meeting, breaking above the 147.00 level. A downward pullback is currently underway after the pair briefly rallied to 148.60. On the USD/JPY daily chart, a bearish engulfing pattern has emerged, which may prompt a decline towards the 146.50–146.20 area. A resumption of the bullish trend is likely if the pair breaks above the recent high at 148.60.

Events that may influence USD/JPY pricing:

• Today at 12:15 (GMT+3): Speech by Fed Member Christopher Waller;
• Today at 17:00 (GMT+3): US Crude Oil Inventories data;
• Tomorrow at 15:30 (GMT+3): Release of the US Core Retail Sales Index.

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