EUR/USD: what is the acceleration of inflation in the Eurozone leading to?
The dollar resumed growth after a 2-week fall the days before. So, at the time of publication of this article, futures for the DXY dollar index are trading near 101.90, 60 points above yesterday's low. The growth driver for DXY was today's publication of statistics from the Eurozone, according to which the consumer price index (CPI) for the Eurozone rose in May by +8.1% (in annual terms), which was higher than the forecast of growth by +7.7% and the previous values +7.4%.
The share of the euro in the DXY dollar index is approximately 57%, so the weakening of the euro led not only to the growth of DXY, but also to the fall of the EUR/USD pair. It has declined from today's high of 1.0779 and is trading near 1.0700 at the time of writing.
Economists expect inflation to accelerate in the Eurozone, and they see the reason for this in a new round of rising energy prices, while the EU introduces more and more new sanctions against Russian energy carriers. Food prices have also risen strongly, and Russia is known to be the largest supplier. Thus, Russia's share in the world grain supply is approximately 18%, and Ukraine's 10%, and the military conflict in Ukraine, where Russia is conducting a special military operation, affects not only the rise in food prices, but also energy, primarily for Europe.
Inflation data released this morning reinforce expectations that the ECB will raise rates in July for the first time in more than 10 years.
A break of the support level at 1.0677 will accelerate the decline of EUR/USD towards the lower border of the descending channels on the daily and weekly charts and the level of 1.0355 (for more details, see "EUR/USD: technical analysis and trading recommendations for 05/31/2022").
Support levels: 1.0677, 1.0600, 1.0500, 1.0485, 1.0400, 1.0355, 1.0300
Resistance levels: 1.0740, 1.0780, 1.0800, 1.0810, 1.1000, 1.1040, 1.1100, 1.1165, 1.1285
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Source: InstaForex
