Dollar Remains Pressured Despite Higher CPI
Dollar remains pressured by majors, in particular against Euro and Swissy in US session even though Feb CPI and industrial production data were both solid. US Core CPI rose 0.2% mom, 2.7% in Feb, in line with consensus. Meanwhile a 0.9% increase in energy prices has pushed headline CPI to 0.4% mom, 2.4% yoy, slightly above expectation of 0.3%, 2.3%. Meanwhile industrial production rose 1.0% in Feb, much stronger than expectation of 0.3%. Jan’s growth rate was also revised up from -0.5% to -0.3%. Capacity utilization increased from 81.3% to 82.0%.
Technically speaking, even though dollar recovers mildly in early US session, risk remains on the downside. In particular, EUR/USD is set to retest 06 high of 1.3364 while USD/CHF could head towards last year’s low of 1.1878 too. However, the Japanese yen fails to ride of dollar’s weakness as USD/JPY is still trapped in established range.
EUR/USD
Daily Pivots: (S1) 1.3203; (P) 1.3226; (R1) 1.3261;
More
EUR/USD remains strong today, extending rally to as high as 1.3338 so far, breaking above mentioned 1.3296 resistance. At this point, intraday bias remains on the upside and further rally is still expected to follow to retest 1.3364 high. Touching of 1.3279 will indicate an intraday top is formed and turn intraday outlook consolidative first. But a break below 1.3185 resistance turned support is needed to indicate the rise from 1.3070 has completed. Otherwise, further rally is still expected after consolidation.
In the bigger picture, the corrective fall from 1.3364 has completed with three waves down to 1.2865. With EUR/USD staying within medium term rising channel (lower channel line at 1.2864 now), medium term up trend from 1.1639 is still in progress. Current rally is being treated as resumption of this up trend. Sustained break of 1.3296 resistance adds more credence to this view and should push EUR/USD to a new high above 1.3364.
However, with bearish divergence condition in weekly MACD and RSI, a medium term top could be around the corner. Upside of this medium term rally could be limited by resistance zone of 1.3668 (04 high) and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. But clear reversal pattern or a break of the lower channel line is needed to indicate a medium term top is formed, otherwise, further rise is still in favor.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY, EUR/JPY) here.
Shing-Ip Tsui is the founder and CEO of
www.ActionForex.com. ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.