Below-Forecast U.S. CPI, Retail Sales to Fuel EUR/USD Rate Rally
- 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)
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||Pips Change|
|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
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 more insight? 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
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