EUR/USD: Eurozone inflation back in ECB target
Macroeconomic overview
Inflation in the Eurozone accelerated to 1.8% yoy, up from 1.1% in December, putting it within range of the European Central Bank's medium-term target of below but close to 2%. It was the highest rate since February 2013.
Core inflation, which excludes volatile prices of energy and unprocessed food and which the ECB focuses on in its policy decisions, was stable at 0.9% yoy, however.
ECB President Mario Draghi said last Thursday he would look past energy price fluctuations until underlying inflation picked up in a "convincing" way.
Energy prices jumped 8.1% year-on-year in January after a 2.6% increase in December and unprocessed food was 3.3% more expensive than a year earlier.
Separately, the statistics agency said Eurozone GDP rose 0.5% qoq in the last three months of 2016, as expected, for a 1.8% yoy rise. In the whole of 2016, euro zone GDP rose 1.7%, down from a five-year high of 2.0% in 2015.
Stronger economic growth also helped bring down the bloc's unemployment rate to 9.6% in December, the lowest since May 2009 before Greece's debt crisis broke out.
Technical analysis
The rejection of a bearish move yesterday is an important signal for the coming days. The EUR/USD remains above the 14-day exponential moving average, which highlights that the overall structure is bullish now.
Trading strategy
Today’s Eurozone inflation reading is a strong support for our long position. The market will be focused now on Fed statement. We do not expect a strong hint for the timing of the next rate Fed hike, which should also fuel the EUR/USD rise. Recent macroeconomic data from the Eurozone are pretty in line with our long-term scenario, which encourages us to open a long-term EUR/USD position with the target at 1.1090.
GrowthAces.com - Daily Forex Trading Strategies
Macroeconomic overview
Inflation in the Eurozone accelerated to 1.8% yoy, up from 1.1% in December, putting it within range of the European Central Bank's medium-term target of below but close to 2%. It was the highest rate since February 2013.
Core inflation, which excludes volatile prices of energy and unprocessed food and which the ECB focuses on in its policy decisions, was stable at 0.9% yoy, however.
ECB President Mario Draghi said last Thursday he would look past energy price fluctuations until underlying inflation picked up in a "convincing" way.
Energy prices jumped 8.1% year-on-year in January after a 2.6% increase in December and unprocessed food was 3.3% more expensive than a year earlier.
Separately, the statistics agency said Eurozone GDP rose 0.5% qoq in the last three months of 2016, as expected, for a 1.8% yoy rise. In the whole of 2016, euro zone GDP rose 1.7%, down from a five-year high of 2.0% in 2015.
Stronger economic growth also helped bring down the bloc's unemployment rate to 9.6% in December, the lowest since May 2009 before Greece's debt crisis broke out.
Technical analysis
The rejection of a bearish move yesterday is an important signal for the coming days. The EUR/USD remains above the 14-day exponential moving average, which highlights that the overall structure is bullish now.
Trading strategy
Today’s Eurozone inflation reading is a strong support for our long position. The market will be focused now on Fed statement. We do not expect a strong hint for the timing of the next rate Fed hike, which should also fuel the EUR/USD rise. Recent macroeconomic data from the Eurozone are pretty in line with our long-term scenario, which encourages us to open a long-term EUR/USD position with the target at 1.1090.
GrowthAces.com - Daily Forex Trading Strategies