US CPI preview: What to expect of EUR/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 19, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    The bid tone around EUR/USD pair is recovering on the back of oil-driven weakness in the European stocks ahead of the US CPI release. The pair is trading around 1.1110 levels.

    Focus on core CPI

    The January CPI is seen dropping 0.1% m/m, but the headline figure is still seen jumping 1.3% y/y. The month-on-month drop may not come as a surprise to the markets since oil prices fell sharply in December-Jan period. Consequently, the focus is likely to be more on the core-CPI number.

    CPI ex-food and energy (core) is seen rising 0.2% m/m and 2.1% y/y. Fed minutes released earlier this week showed policymakers still expect inflation to rise to 2% over the medium term. Hence, the greenback could strengthen ahead of the weekend if the core figure rises expected/more-than-expected.

    On the other hand, a weaker than expected core number could weigh over USD, although losses may not be significant if the oil prices extend gains and weigh over equities; leading to a rise in demand for the EUR.

    EUR/USD Technical Levels

    The immediate resistance is seen at 1.1152 (5-DMA), which if taken out shall open doors for a rally to 1.12 (10-DMA). A break higher would shift risk in favor of a rally to 1.1236 (38.2% of Mar low-Aug high). On the other hand, a breakdown of the immediate support at 1.1088 (50% of Mar low-Aug high) could see the spot drop to 1.1053 (200-DMA), which if breached shall open doors for a slide to 1.10.
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