http://www.dailyfx.com/forex/fundamental/article/fundamentals_vs_technicals/2011/01/03/Will_a_Better_Than_Expected_Euro-Zone_CPI_Estimate_Keep_the_Bullish_EURUSD_Trend_Intact.html
Jan 04 | Euro-Zone CPI Estimate | |
| Expectations: 2.0% | ||
| Prior: 1.9% | ||
Fundamental Outlook
Euro-Zone consumer prices estimate for the month of December is expected to rise an annualized 2.0 percent after climbing 1.9 percent in November. The reading is of particular importance due to the fact that inflation pressures leads the European Central Bank closer to raising the benchmark interest rate. Though the central bank is unlikely to raise its key overnight lending rate amid debt contagion fears which continues to rattle the European markets, a CPI reading exceeding expectations may add upward momentum to the euro following China’s announcements that it will continue to buy Spanish public debt and up to 6 billion euros of Portugal’s debt in the first quarter (the latter has yet to be confirmed, but is worth noting). This move by the world's second largest coutnry comes to light as concerns boil that these two economies may be next in line to tap into the EU-IMF life line. Despite the medium term bearish outlook, traders should not rule out a better than expected CPI estimate report which may serve as the catalyst needed for the euro in the short term.
Technical Outlook
EURUSD Daily Chart
Charts Created Using FXCM’s Strategy Trader – Prepared by Michael Wright
EURUSD: Price action halted its three day advance, but the decline may be short live as the pair eyes the 50-day moving average. Indeed, the pair has broken above its descending channel dating back to November 9th, which signals gains. As the “crowd” continues to bet against euro gains, providing the contrarian signal to buy the single currency, traders should not rule out a test of the 50-day SMA. At the same time, the MACD continues to point to gains, while the slow stochastic indicator has yet to reverse course.
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Written by Michael Wright, Currency Analyst
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Michael Wright authors FX Headlines, Fundamentals vs. Technical’s, Intraday Trading, Weekly Spotlight, and Forex Trading Weekly Forecast
DailyFX provides forex news on the economic reports and political events that influence the currency market.
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