Euro holds the high ground ahead of US CPI

The euro has mostly held onto recent gains as the European Central Bank’s Isabel Schnabel reiterated hawkish weekend comments by fellow ECB board member and Bundesbank President Joachim Nagel over the weekend.

The single currency was further aided by the backdrop of possible good news in the Ukraine conflict.

Overall, it is a softer US dollar that appears to be the main theme going into today’s US CPI number. Headline month-on-month CPI for August is anticipated to be -0.1% against a flat number for July and 8.1% for the year-on-year figure against 8.5% previously.

Month-on-month ex food and energy CPI is forecast to print the same as the prior month at 0.3%, with the annual read expected to be 6.1% versus 5.9% previously.

Risk asset appetite has been buoyed by the perception of a possible peak in US inflation.

Strong pre-sales figures for Apple’s iPhone 14 Pro Max helped to boost Asian suppliers of its components. APAC equity indices are all in the green following on from a rosy Wall Street lead.

While the commodity and growth linked Aussie and Kiwi dollars had a stellar Monday, they have nudged lower so far today. Gold is steady just above US$ 1,720.

The Japanese Yen has been the best performer through the Asian session. Without any formal jawboning, it was left to former Bank of Japan board member Goushi Kataoka to get the job done. He said that the central bank might be able to normalize policy in mid-2023.

Crude oil is slightly lower so far today with the WTI futures contract being near US$ 87.50 bbl while the Brent contract is around US$ 93.50 bbl. The Organization of Petroleum Exporting Countries (OPEC) releases its monthly report later today.

EUR/USD technical analysis

EUR/USD cleared several resistance levels on Monday but failed to overcome a descending trendline and the 55-day simple moving average (SMA) and they may continue to offer resistance.

Further up, the 1.0370 – 1.0370 area could offer resistance with several break points, a prior high and the 100-day SMA in that zone.

On the downside, support might be at the recent low of 0.9864 or the 161.8% Fibonacci Extension of the move between 0.9953 to 1.0369 at 0.9695.

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