The U.S. dollar rose to fresh highs against the euro and British pound after the U.S. inflation print showed the highest annual rate of inflation in over 20 years at 6.2 percent. Rate hike bets surged as investors began to price in tighter monetary policy from the Federal Reserve in order to curb inflation. The market is now pricing in a full 25bp rate hike by July 2022.
Both EUR/USD and GBP/USD slipped below crucial support zones and bears are eyeing next lower targets.
GBP/USD: If 1.3390 breaks, we see a next important target at 1.33 from where bulls could try to start a countermove. A current resistance is seen at 1.3520.
EUR/USD: Remaining below 1.15, next lower targets are seen at 1.1450 and 1.14 but traders should be careful. The pair is oversold in short-term time frames which is making corrective moves more likely. Short-term resistances are seen at 1.1540 and 1.1580.
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