U.S. CPI
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Below-Forecast U.S. CPI, Retail Sales to Fuel EUR/USD Rate Rally

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- U.S. Consumer Price Index (CPI) to Slow to Annualized 2.1% from 2.2% in November.

- Core Inflation to Hold Steady at 1.7% per Annum, Retail Sales to Increase 0.5% .

Trading the News : U.S. Consumer Price Index (CPI)

U.S. CPI

Fresh developments coming out of the U.S. economy may fuel the near-term rally in EUR/USD as the Consumer Price Index (CPI) is projected to slow in December, while Retail Sales are expected to increase 0.5% following the 0.8% rise in November.

A set of lackluster data prints is likely drag on the U.S. dollar as it curbs bets for an imminent rate-hike, and the Federal Open Market Committee (FOMC) may largely endorse a wait-and-see approach at the next rate decision on January 31 as inflation continues to run below the 2% target.

Signs of subdued price growth may also spark a growing dissent within the central bank as ' some participants observed that there was a possibility that inflation might stay below the objective for longer than they currently expected,' with the FOMC running the risk of completing its hiking-cycle ahead of schedule especially as ' other persistent factors may be holding down inflation, which would present challenges for the Committee in promoting a return of inflation to 2 percent over the medium term.'

Nevertheless, a set of positive U.S. data prints may tame the recent pickup in EUR/USD, with the pair still at risk of carving a double-top formation amid the failed attempt to clear the September-high (1.2092). New to trading? Review the ' Traits of a Successful Trader' series on how to effectively use leverage along with other best practices that any trader can follow.

Impact that the U.S. CPI has had on EUR /USD during the previous release

Period Data Released Estimate Actual Pips Change(1 Hour post event ) Pips Change(End of Day post event)
NOV2017 12/13/2017 13:30:00 GMT 2.2% 2.2% +26 +91

November 2017 U.S. Consumer Price Index (CPI)

EUR/USD 5-Minute Chart

EUR/USD Chart

The U.S. Consumer Price Index (CPI) climbed to an annualized 2.2% from 2.0% in October, while the core rate of inflation unexpectedly slipped to 1.7% from 1.8% during the same period to mark the first slowdown since May. A deeper look at the report showed a 3.9% rise in Energy prices, with transportation costs also climbing 1.9%, while prices for Apparel fell 1.3% in November.

The mixed detailed surrounding the inflation report dragged on the U.S. Dollar, with EUR/USD climbing above the 1.1750 region to end the day at 1.1826. For additional resources, download and review the FREE DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Daily Chart

Want m ore i nsight? Join DailyFX Currency Analyst David Song LIVE to cover the market reaction to the U.S. CPI & Retail Sales report.

  • EUR/USD appears to be making another attempt to test the September-high (1.2092) as it snaps the series of lower highs & lows from earlier this week, with both price and the Relative Strength Index (RSI) on course to extend the bullish formations carried over from late-2017.
  • Break above the September-high (1.2092) would negate the threat for a double-top, with the next topside hurdle coming in around 1.2130 (50% retracement) followed by the 1.2230 (50% retracement) region.
  • May see EUR/USD stage a more meaningful advance if the RSI pushes into overbought territory as it suggests the bullish momentum is gathering pace.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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