The dollar under pressure from sellers, the EUR/USD rate shot up

The key event of yesterday's session was the publication of inflation data from the United States. US CPI data for October indicated a greater than expected slowdown. Main CPI inflation rate slowed down from 3,7% to 3,2% y/y (expected 3,3% y/y), while the core index dropped from 4,1% to 4,0% y/y (expected 4,1% y/y /r). The reaction on the Forex market and on the stock market was immediate. The American currency came under pressure from sellers, a the main US stock indexes shot up, also pulling indices from other countries.

The Fed will no longer decide to increase rates

Due to the weakening of the dollar, there was also a solid increase in the gold market. The data confirmed market participants' belief that the Fed will not decide to increase interest rates this year. This also means that the tightening cycle is probably over. Expectations for cuts have also increased and it is currently estimated that in 2024 interest rates in the US will be reduced by 100 basis points, with the first cuts likely to be seen in June.

As for today's session, we will also find important readings in the calendar, though they shouldn't cause such a big reaction, like yesterday's CPI inflation release. In the afternoon we will know the data on retail sales and o PPI inflation from the United States and data on oil stocks. On Wednesday morning, we observe a continuation of growth on the stock market and a slowdown in the USD movement, which slightly corrects yesterday's weakening. However, the scale of the movement is small, investors are apparently waiting for the afternoon macro data from the US. In the event of a lower PPI reading, the American currency may come under pressure again.

The sentiment has changed to bullish

Looking at the chart main currency pair, two important resistances were overcome at 1,0760 and 1,0800. Although it may have seemed that the movement since October 4 was only a correction, after yesterday's session it can be assumed that the medium-term sentiment has changed to an upward one. Yesterday's D1 candle closed above the 50% retracement of the downward wave lasting since July 17, 2023, so if sentiment is maintained, quotes may head towards the next Fibonacci ratio - 61,8% at the level of 1,0960. On the other hand, After such a dynamic growth wave, a correction can be made. Considering such a scenario, the first support should be the round level of 1,0800, and then 1,0785, which is the lower limit of the wide 1:1 system.

Looking at the zloty, it benefited from the upward movement on EUR/USD. A weaker dollar should support our national currency. The USD/PLN and EUR/PLN pairs exceeded important levels, in line with our expectations, which gives an opportunity for further strengthening of the PLN. USD/PLN more than exceeded the level of 4,0850 indicated in yesterday's commentary, and the declines stopped only at the level of 4,0250. It seems that a correction is possible at this point, however the main trend on USD/PLN remains down. We have a similar situation on EUR/PLN, where quotations are at levels not seen since August 2022. The price breaking below the zone of PLN 4,41-4,40 gives a chance for a further decline. The mentioned zone should currently be treated as a key resistance.

On Wednesday after 11:00 we will pay PLN 4,0445 for the dollar, PLN 4,3920 for the euro, PLN 4,5520 for the franc and PLN 5,0455 for the pound.

Source: Łukasz Stefanik, XTB