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Strong U.S. Consumer Price Index (CPI) to Curb EUR/USD Rebound

Strong U.S. Consumer Price Index (CPI) to Curb EUR/USD Rebound

2018-04-11 08:00:00
David Song, Strategist
Share:

- U.S. Consumer Price Index (CPI) to Increase Annualized 2.4% in March. Core Rate of Inflation to Expand 2.1% per Annum After Rising 1.8% the Month Prior.

- EUR/USD Preserves Bullish Sequence. Outlook Mired by 2018-Range.

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

DailyFX Calendar

Updates to the Consumer Price Index (CPI) may heighten the appeal of the U.S. dollar as both the headline and core rate of inflation are expected to exceed 2% in March.

A material pickup in the CPI may fuel bets for four Fed rate-hikes in 2018 as Chairman Jerome Powell and Co. prepare households and businesses for higher borrowing-costs, and the Federal Open Market Committee (FOMC) may relay a more hawkish tone at the next interest rate decision on May 2 as price growth exceeds the 2% target.

However, a batch of lackluster data prints may produce a bearish reaction in the U.S. dollar as it curbs bets for an extending hiking-cycle, and the central bank may continue to project a neutral Fed Funds rate of 2.75% to 3.00% as the outlook for inflation remains subdued.

Impact that the U.S. CPI report 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)

FEB

2018

03/13/2018 12:30:00 GMT

2.2%

2.2%

+22

+48

February 2018 U.S. Consumer Price Index (CPI)

EUR/USD 5-Minute Chart

EUR/USD 5-Minute Chart

The U.S. Consumer Price Index (CPI) increased for the first time since November, with the headline reading climbing to an annualized 2.2% from 2.1% in January, while the core rate of inflation held steady at 1.8% for the third consecutive month in February. A deeper look at report showed the cost of apparel increasing 1.5% during the month to lead the advance, with fuel & utility prices climbing 1.0% during the same period, while food costs held flat in February after increasing 0.2% the month prior.

The U.S. dollar struggled to hold its ground following the lackluster prints, with EUR/USD climbing above the 1.2300 handle to end the day at 1.2389. Want More insight? Join DailyFX Currency Strategist Christopher Vecchio LIVE to cover the fresh updates to the U.S. CPI report.

EUR/USD Daily Chart

EUR/USD Daily Chart
  • EUR/USD looks poised to test the March-high (1.2476) as it preserves the series of higher highs & lows from earlier this week, while the Relative Strength Index (RSI) continues to track the bullish formation carried over from late last year.
  • Need a break/close above the Fibonacci overlap 1.2370 (61.8% expansion) to 1.2430 (50% expansion) may foster a larger rebound in EUR/USD, but the near-term outlook remains mired by the 2018-range, with resistance coming in around 1.2540 (38.2% expansion).

For more in-depth analysis, check out the Q2 Forecast for EUR/USD

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--- Written by David Song, Currency Analyst

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

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