Abstract:EURUSD may extend Mondays decline and re-enter a critical resistance-turned support channel if Eurozone CPI data misses estimates and fuels rate cut bets.
EURUSD, EUROZONE CPI, ECB – TALKING POINTS
EURUSD may continue its decline and delve further into critical support channel
The pairs decline could be amplified if Eurozone CPI data undershoots forecasts
Data may fuel rate cut bets and give ECB impetus to loosen credit, reintroduce QE
See our free guide to learn how to use economic news in your trading strategy!
EUROZONE CPI, EU-US TRADE WAR
EURUSD may fall if Eurozone year-on-year CPI data falls short of the 1.2 percent forecast, which is an-already low estimate considering price growth has not been at that level since March 2018. If it undershoots, this would fall in line with the broader trend of underperformance in economic data where for several months reports have fallen short of economists estimates.
Furthermore, a lower-than-expected CPI print could fuel rate cut bets and provide further impetus for the ECB to reintroduce QE. Overnight index swaps are already showing an 85 percent probability of a cut by the September meeting which will only be amplified by signs of slower price growth. Christine Lagarde will be taking over Mario Draghis position as ECB President and will likely follow in his policy footsteps.
Growing trade tension between the EU and US may weigh on consumer and business confidence and further weigh on inflationary pressure. Washington and Brussels are in the processing of a resolving a 14-year-old dispute with the WTO as the meditating officer. A resolution to the quarrel will be announced by the end of the summer, though it may not be an outcome markets will welcome. It could be another tit-for-tat tariff tiff.
EURUSD TECHNICAL ANALYSIS
The pair is now within spitting distance of the upper bound of the 18-month descending resistance-now-turned-support channel. During Mondays trading session the pair failed to break below, though the extended wick indicates a modest flirtation with the idea. Underperforming CPI data may be a catalyst in pressuring EURUSD lower to renter the channel and resume its previous downtrend at a steeper slope.
CHART OF THE DAY: EURUSD COQUETTISHLY APPROACHES KEY SUPPORT CHANNEL
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
The New Zealand central bank maintain its benchmark interest rate at 5.50% as expected during its previous meeting. While there was no surprise of the central bank paused rates, the less hawkish tone was a surprise as 23% of the market surveyed by Reuters predicted an interest rate hike. In February, the rate of consumer price growth in the United States picked up pace with the reading came in at 3.2%, surpassing expectations of 3.1% for underlying inflation.
these are the GEM numbers of the month for February:
The Week Ahead: Will the FED pivot to the emerging dynamics?
European Central Bank under enormous pressure ahead of Fed rates