EURUSD steady to start the trading week

Looking at the hourly chart, the pair moved up to test the March high on Thursday of last week, but fell short of that target. The high for the week of reached 1.11369 which was just short of the March 2 high at 1.11429.

The subsequent fall on Friday saw the pair test and crack below the 100 hour moving average (blue line in the chart above – currently at 1.1018), but fall short of the 200 hour moving average (green line). The 200 hour MA is currently at 1.0998 just below the natural support at 1.1000. The price corrected higher into the close on Friday.

Of note technically from last week, is the price moved back above its 200 hour moving average (green line)on Wednesday and based against that moving average level at the lows on that day. The dip on Friday also stayed above that MA at the session lows.

As a result, the buyers are still in play – and in control – in the short term above those MA levels. It would take a move below the 100 hour MA at 1.1018 currently and the 200 hour MA at 1.0998 (and below the natural support at 1.1000) to shift the bias more in favor of the sellers. Until then, the tilt of the bias is in the buyers favor.

Topside targets would include the 38.2% of the move down from February 10 high at 1.10684. Above that and traders will eye 1.1106 to 1.11207, and then the highs for the month between 1.11369 and 1.11429.

Fundamentally over the weekend, ECB de Guindos told German newspaper Handelsblatt, that the ECB would take action if it sees second-round  inflation 
Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Read this Term effects, and eight the anchoring of medium-term inflation expectations.