Impact of Disappointing CPI Neutralized by Other Solid Data

Dollar was sold off in early US session after disappointing CPI inflation data but negative sentiments is neutralized after other solid data.
Both headline and core CPI are flat in Nov. Though it represents some improvements in headline CPI comparing to prior two months’ 0.5% fall, it disappoints markets by missing expectation of 0.2% rise. Yoy increase was dragged down to 2.0%. More importantly, core CPI, growth continues to slow and dropped to 0%, also missing expectation of 0.2%. Yoy growth of core CPI was dragged to 2.6% from 2.7%.

Other data are pretty positive indeed. Dec NY state index came in at 23.1, above cons of 18.0. TIC capital flows also came in much higher than expectation by rising to 82.3B, with prior figure upwardly revised to 70.2B. Nov Industrial Production increased 0.2%, beating expectation of 0.1% too.


Daily Pivots: (S1) 1.9550; (P) 1.9630; (R1) 1.9683;


Cable’s fall from 1.9727 has spiraled to 1.9556 before a strong rebound in early US session. Break of 1.9642 minor resistance suggest that an intraday low is formed and turns intraday outlook neutral. However, risk for another fall remains as long as the current rebound is kept below 1.9727 resistance. Below 1.9556 will encourage further decline towards 1.9463 cluster support (38.2% retracement of 1.8834 to 1.9846 at 1.9459)

On the downside, since we’re treating price action from 1.9846 as correction the whole rally from 1.834, we’d expect downside of this correction to be contained by 1.9338/40 cluster support (50% retracement of 1.8834 to 1.9846 at 1.9340, 38.2% retracement of 1.8517 to 1.9846 at 1.9338, 10% projection of 1.9846 to 1.9463 from 1.9727 at 1.9344) and bring rally resumption.

On the upside, above 1.9727 will encourage a retest of 1.9846 high, but still, a decisive break of 1.9846 is needed to signal recent rally has resumed for next upside target of 138.2% projection of 1.8090 to 1.9142 from 1.8517 at 1.9971. Otherwise, consolidation might extend further.

In the bigger picture, break of 1.9554 high added much credence to the case that multi-year up trend from 1.3680 has resumed but this is not confirmed yet. Nevertheless, medium term up trend from 1.7047 is still treated as in force before a break of 1.9177 cluster support (50% retracement of 1.8517 to 1.9846 at 1.9182) or clear reversal pattern forms. Hence, at this moment, we’d still expected the medium term rise from 1.7047 to continue. On the upside, 2.0106 cluster resistance (1992 high, 100% projection of 17047 to 1.9024 from 1.8090 at 2.0067) will be the key resistance to watch out for. Decisive break of this resistance will confirm that long term up trend from 1.3680 has resumed.

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Shing-Ip Tsui is the founder and CEO of 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.