EUR/USD: Investors Shrugged Off Eurozone Data Eyes On FOMC Minutes Today
Growth Aces | Feb 22, 2017 07:18AM ET
EUR/USD: Investors shrugged off Eurozone data, eyes on FOMC minutes today
Macroeconomic overview
U.S. Federal Reserve meeting minutes due later on Wednesday could either reinforce or undermine recent hawkish comments from central bank policy makers that have raised bets on a rise in rates as early as next month.
Cleveland Fed President Loretta Mester said on Monday that she would be comfortable raising rates at this point if the economy maintained its current performance. Philadelphia Fed President Patrick Harker said on Monday that he would support a rate increase at a mid-March policy meeting as long as inflation, output and other data continued to show the U.S. economy is growing. But as we wrote yesterday, their comments brought nothing new to market expectations.
We think that the likelihood of Fed hike in March is very low. Our baseline scenario is a hike in June.
Euro zone inflation rose to an annual rate of 1.8% in January, the European Union statistics agency said today confirming its earlier estimates. Stripped of the volatile components of energy and unprocessed food, an indicator closely watched by the European Central Bank, the annual inflation rate in January was 0.9%, confirming Eurostat's earlier estimate and the market consensus.
Ifo economic institute said its business climate index for Germany rose to 111.0 from a upwardly revised reading of 109.9 in January. The reading came in far stronger than market consensus forecast for a value of 109.6. This is another sign of bright recovery of Eurozone economy after yesterday’s PMI readings.
The EUR/USD fell below 1.0500 today. Investors keep shrugging off rising inflation and strong macroeconomic data from the Eurozone. We think that a corrective move is likely after today’s FOMC minutes, because we think they will not point to a hike next month and this may disappoint USD bulls.
Technical analysis
The EUR/USD broke below the support at 1.0522. The next target of EUR/bears is 1.0451 (76.4% fibo of January-February rise) and then full retracement to the January 1.0340 base. Declining 14-day exponential moving average at 1.0616 weighs heavily on the market.
Trading strategy
Our long was stopped below 1.0522 support. We stay sideways now, as the outlook is unclear for now. Fundamental factors suggest a recovery in the EUR/USD. But the EUR is weakening despite accelerating inflation and recent much-better-than-expected macroeconomic indicators from the Eurozone. What is more, FOMC roster in 2017 is more dovish than it was in 2016 and we had no hint on timing of next hike in the previous FOMC statement, so we think that the likelihood of March hike is very low. A comeback to fundamental trading may result in rapid EUR/USD recovery, but for now technical analysis suggests a continuation of bearish move to 1.0340.
Get The News You Want
Source: GrowthAces.com - Daily Forex Trading Strategies
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.