June EMU HICP Inflation confirmed at 1.3% Y/Y

EURUSD, H4

Final June EMU HICP inflation was confirmed at 1.3% y/y, in line with the preliminary number and down from 1.4% y/y in May. The breakdown confirmed that the deceleration in the headline rate was mainly due to lower energy price inflation, which dropped back to just 1.9% y/y from 4.5% y/y in the previous month. Services price inflation meanwhile accelerated to 1.6% y/y. Still, while core inflation moved up from the 0.9% y/y in May, at 1.1% y/y it remains far below the ECB’s 2% limit for price stability and prices for non-energy industrial goods rose just 0.4% y/y, so plenty there for the doves at the ECB to argue with. Against that background Draghi is likely to stick to the message from June at this week’s council meeting and try to calm tapering nerves ahead of the summer break.

EURUSD after edged out a three-session high at 1.1474 on Friday, today was getting lower on the anticipation of  EMU HICP data. However until the data were out, the pair ebbed at 1.1434 low, while currently after the data were confirmed inline with the expectations, it is traded above 1.1450. Hence in the hourly chart, the pair tries to recovers today’s losses, despite the fact that it is still moving in the lower Bollinger Bands area, and Parabolic SAR are negative. Nevertheless, also higher time frames such as 4-hour, Daily and Weekly, suggest that uptrend is likely to continue this week, since USD weakness is likely to continue, due to last week’s US data and the significant Fed Chair Yellen’s Testimony. US markets will continue to assess Fed Chair Yellen’s testimony last week, where she remained optimistic on growth, but hedged on “transitory” inflation outlook.

Therefore, an Intra Day and a Daily Long positions were taken, with entry at 1.1447 today, since the pair did not manage to break down the 1.1400 level and it is currently continue moving north again. Hence Intra Day Target was set at Friday’s high, i.e. 1.1490, while Daily Target was set on 1.1530.  Support was set at 1.1360 .These positions were based mainly on the facts that pair manages to continue making higher high fractals in the Daily chart,  while it is well supported by 50 DMA since April. In the 4- hour chart, despite weakness observed today morning, EURUSD manage to stay above 20 period MA, while RSI is at 58 looking upwards, and Parabolic SAR remained positive since Friday.