FX Headlines: EURUSD Remains Capped by 1.36 Ahead of U.S. Inflation Report
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EURUSD: Euro-Zone construction output slipped 1.8 percent in December after falling 0.9 percent the month prior, while the annualized rate dropped 12.0 percent. At the same time, the current account balance in the 17 member euro posted a 0.1 billion deficit. As governments implement tough austerity measures in order to battle their high budget debts, the current account balance may remain under pressure in the coming months.
Meanwhile, the Federal Reserve recently ordered 19 of the largest U.S. banks to test their capital levels against the possibility of a renewed recession amid slack in the world’s largest economy. The recent announcement is worrisome due to the fact that unemployment is unlikely to return back below 8 percent this year as businesses remain reluctant to add payrolls due to uncertainty in the U.S. economic outlook. As concerns in the U.S. remain, any dovish statements by policy makers paired with continued slack in inflation and employment may lead traders to seek safety, which will benefit the dollar.
Taking a look at price action, the EURUSD has worked its way into a descending 4H channel that has remained intact since February 1st. As the dollar index looks bounces off of the lower bounds of its ascending hourly channel, traders should caution further losses in the EURUSD so long as upside risks remain capped by 1.36.
Currency traders will now shift their focus to the U.S. consumer prices report which will be released at 13:30 GMT.
Written by Michael Wright, Currency Analyst
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly Forecast
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.