<p style=““ class=“text-align-justify“>The pair is down 0.4% on the day to 1.1878 at the moment and is poised for a third straight day of declines. The bounce higher after the US CPI data last week failed to breach the key trendline resistance (white line) and it has been one-way traffic since as the dollar recovers strongly through to this week.</p><p style=““ class=“text-align-justify“>On the pound side of the equation, we saw UK GDP suffer a contraction in Q2 and annual consumer inflation hitting a 40-year high above 10% in the past week. Retail sales data was slightly better today but it isn’t as much comfort as the economic outlook remains rather dire to say the least.</p><p style=““ class=“text-align-justify“>The BOE has a fine balancing act to do and odds are, if the data worsens further in the months ahead, there is every chance we could see the door slowly being shut for the central bank to tighten policy further.</p><p style=““ class=“text-align-justify“>Considering that both central banks already gave a formal message that we are in the second-half of the tightening cycle, the trade for cable is very much a case of who folds first? The Fed or the BOE? In this instance, it looks very much like the latter.</p><p style=““ class=“text-align-justify“>As such, the path of least resistance is for the pair to move lower – all else being equal. Now, with the dollar picking up steam across the board, the next test is 1.1800 and the year’s low at 1.1759.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>Despite the narrow range on the day, there is a lot to digest when it comes to looking at the EUR/USD chart at the moment. The most glaring detail is the break back below 1.0100 after the breakout above the range of 1.0100 to 1.0283 failed at the 61.8 Fib retracement level at 1.0361 highlighted earlier in the week <a target=“_blank“ href=“https://www.forexlive.com/news/eurusd-lower-on-firmer-dollar-failed-breakout-bodes-ill-for-the-euro-20220816/“ target=“_blank“>here</a>.</p><p style=““ class=“text-align-justify“>With the dollar seen firmer across the board and also making headway against the likes of the yen and pound, there is a strong argument for EUR/USD to head back towards parity in the sessions ahead.</p><p style=““ class=“text-align-justify“>So far, there is a lack of appetite for a strong move today but we’ll see if there is any major extension to follow once US traders come into the fray. It will be important to see how price action develops from here as I fear another retest of parity will not be one where the euro fares too well this time around.</p><p style=““ class=“text-align-justify“>The outlook for the euro area remains bleak as recession risks are on the rise and today’s record rise in German producer prices exemplifies the nature of which surging prices is taking a toll on the region. As much as euro area governments are playing down the risks, soarin energy prices ahead of winter is going to lead to a dark period for businesses and consumers.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>European indices are deepening losses across the board with US futures also slumping more heavily now on the day. S&P 500 futures are down 35 points, or 0.8%, as the drop extends:</p><p style=““ class=“text-align-justify“>Meanwhile, the DAX is down 0.9%, Eurostoxx down 0.9%, and CAC 40 down 0.7% currently. Regional indices aren’t able to take much comfort after having seen German producer prices post a record increase in July <a target=“_blank“ href=“https://www.forexlive.com/news/germany-july-ppi-53-vs-06-mm-expected-20220819/“ target=“_blank“>here</a>.</p><p style=““ class=“text-align-justify“>But a firmer dollar and higher yields are also weighing on sentiment, but one can also argue that it is all tied together. Looking at US equities in particular, the rejection of the S&P 500 at the 200-day moving average seems to be the momentum breaker this week.</p>

This article was written by Justin Low at www.forexlive.com.