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EURUSD:
On Wednesday, EUR/USD traders adopted a more cautious approach, allowing Fiber to retreat by approximately a third of a cent and pushing bids back below the significant price target of 1.0900. Despite the significant recovery in EUR/USD over the past couple of weeks, buyers are regaining ground after Fiber corrected more than 5 per cent in less than a fortnight.
This week’s European economic data is minimal due to the prominence of trade war concerns and US inflation data. On Wednesday, the US imposed 25 per cent tariffs on all steel and aluminium imports, a significant escalation in President Donald Trump’s efforts to wage a trade war with all of the country’s allies.
Meanwhile, US consumer price index (CPI) inflation fell more than expected in February, with core CPI at 0.2 per cent month-on-month and 2.8 per cent year-on-year, slightly faster than forecasts. While the figure remains above the Federal Reserve’s (Fed) 2% target, it has raised hopes for a rate adjustment. CME’s FedWatch tool now shows equal odds of a Fed rate cut in June compared to July.
It has been almost four years since US core inflation reached ‘transitory’ levels. Barring a brief slowdown in Q3 2024, key inflation indicators have remained stable since June 2023, when post-Covid inflation fell to an annualised rate of 3%.
Despite the lower CPI reading in February, there are indications of potential challenges for policymakers: gasoline and heating oil prices fell 3.1% and 5.1%, respectively, while natural gas prices increased by 6%. Additionally, housing price inflation increased by 4.2% compared to the previous year, while a modest 0.3% decrease in automobile prices concealed a 2.6% year-on-year rise in food price inflation.
Trading recommendation: SELL 1.0860, SL 1.0930, TP 1.0770
Origin: FreshForex
