USD stays weak despite upbeat inflation

Consumer prices in the United States were seen rising stronger than expected in the month of January. Despite the upbeat figures, the U.S. dollar turned weaker on the day. Headline CPI rose 0.5% on the month beating estimates and rising to an annual pace of 2.1% while core CPI increased 0.3% on the month for an annual gain of 1.8%.

However, the upbeat data was offset by soft retail sales which fell 0.3% in January. The hourly earnings data also showed an increase of 0.8% in January up from December's revised 0.6% increase.

Elsewhere, the Swedish central bank was seen holding its monetary policy unchanged at -0.50% at its meeting yesterday. The central bank signaled that it would hike interest rates in the second half of 2018 while downgrading its inflation forecasts.

Looking ahead the ECB's Chief economists Peter Praet will be speaking at a panel discussion today. Data from the U.S. will see the producer prices numbers coming out for January. This will be followed by the regional manufacturing index data.

EURUSD intra-day analysis

EURUSD (1.2459): The EURUSD was seen posting strong gains yesterday as the common currency maintained gains for three consecutive sessions. Price action recovered back to the 1.2450 handle as it breached the resistance level of 1.2363 - 1.2333 region. However, a follow through is required for the currency pair to maintain the upside trend. Near term dips towards 1.2363 could see support being established which could signal the upside bias. In the event that EURUSD breaks below this level once again, we expect the declines to resume.

GBPUSD intra-day analysis

GBPUSD (1.4011): The British pound maintained gains with price rising to a four-day high as the GBPUSD managed to recover back to the previously established range. The resistance level at 1.4037 is likely to be tested once again in the near term. Further gains can be expected only on a strong close above the resistance level. Meanwhile, as long as the resistance holds, the GBPUSD could be seen maintaining a sideways range within the levels mentioned.

NZDUSD intra-day analysis

NZDUSD (0.7376): The New Zealand dollar posted a strong recovery yesterday as price managed to rise back to a one week high. However, further gains can be expected only a close above the previous highs near 0.7408. There is a possibility that this level could be tested but we expect that NZDUSD could reverse in the short term. Support at 0.7333 is likely to be tested to the downside. The fact that a retest of the lower support level at 0.7160 is still pending could remain as the downside risk.