EUR/USD analysis: US CPI takes center stage

EUR/USD Current price: 1.2362

  • US CPI expected at 1.9% YoY for January.
  • EUR/USD nearing the 1.2400 figure on easing equities, yields.

Currencies were once again dependant on equities and yields for direction, although the greenback was also dumped ahead of US inflation release this Wednesday. The EUR/USD pair surged to 1.2370 and holds nearby by the end of the US session, having steadily advance after breaking above the 1.2300 figure. There were no macroeconomic releases to fuel the ongoing rally and once again,  it was all about equities and yields, both retreating in the US session and leading to USD loses.

Moving-market data will start to flow this Wednesday, starting with Germany that will release January inflation figures and preliminary Q4 GDP. Inflation is seen unchanged from the previous readings, while the economy is expected to have grown 0.6% in the last quarter of 2017 after growing 0.8% in the previous one.  The EU will also release its prelim Q4 GPD, expected at 0.6%, while the star of the day will be US inflation. Despite not being Fed's favorite measure, the world gyrates around inflation these days, and any divergence from market's expectations is probably going to trigger some interesting moves. YoY CPI is expected to be of 1.9% from the previous 2.1%. The US will also release January Retail Sales, seen posting a modest monthly advance.

From a technical point of view, the recovery is quite significant, as the pair bottomed late last week around the 50% retracement on the January rally, and now not only surpassed the 38.2% but is close to the last Fibonacci barrier at 1.2395. In the 4 hours chart, technical indicators hold within positive territory, but the upward strength is easing. The pair is well above its 20 and 200 SMAs but is finding a hard time to surpass the 100 SMA, a few pips above the current level. Anyway, the relevant resistance is the 1.2400 area, the one the pair needs to surpass to maintain the positive bias.

Support levels: 1.2300 1.2260 1.2225                                                                                          

Resistance levels: 1.2400 1.2440 1.2480    

View Live Chart for the EUR/USD

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