CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Two trades to watch: EUR/USD, EUR/GBP

Article By: ,  Senior Market Analyst

EUR/USD falls post US CPI & ahead of retail sales

EUR/USD is falling after two straight days of gains after sticky US inflation and hawkish comments from Fed President Lorie  Logan raise concerns of a more hawkish Federal Reserves.

After US CPI cooled by less than expected to 6.4% YoY in January, hopes of a rapid disinflation eased, and Investors are anticipating a 25 basis point rate hike from the Fed in March and May, taking the rate to 5.25%.

Meanwhile, the euro found some support yesterday from GDP data showing that the bloc’s economy grew 0.1% QoQ in Q4, avoiding a contraction. The data comes after upbeat forecasts from the European Commission, which sees the eurozone avoiding a recession this year.

Today, attention will be on US retail sales, which are expected to rebound, adding to the inflation story. Sales are forecast to rise 1.8% MoM, up from -1.1% decline in December. Strong retail sales could lift the USD further.

In Europe, Eurozone industrial output is expected to fall -0.8% MoM in December after rising 1% in January.

ECB President Lagarde is also due to speak.

Where next for EUR/USD?

EUR/USD broke out below the rising wedge pattern, dropping to a low of 1.0655. The pair is now consolidating, capped on the upside by 1.08 and on the lower side by 1.0655. The RSI is below 50, favoring sellers.

Sellers could look for a fall below 1.0655, the February low to expose the 100 sma at 1.0525 and the 2023 low of 1.0480.

Buyers could look for a rise over 1.08 to create a higher high and target 1.0930, the January high.

 

EUR/GBP rises after weaker-than-forecast UK inflation

The pound is falling reversing gains from the previous session after UK's CPI inflation continued to fall in January.

UK CPI cooled by more than expected to 10.1% from 10.5% in December. Expectations has been for a full 10.3%, thanks in part to falling petrol prices.

Falling services inflation (6% from 6.8%) will be well received by the BoE, particularly after yesterday’s stronger-than-expected wage growth figures.

The data raises questions about the March BoE monetary policy meeting. Investors are reining in expectations of a 25 basis point hike, pulling the pound lower.

Where next for EUR/GBP?

After finding support on the multi-month rising trendline at 0.88, EUR/GBP has rebounded higher. The rise above the 20 sma and the RSI above 50 keeps buyers hopeful of more upside.

Resistance can be seen at 0.89, the January high, with a break above here opening the door to 0.8980, the 2023 high.

On the flipside, immediate support can be seen at 0.8820 the 20 sma, with a breakthrough here opening the door to 0.88 the rising trendline support and weekly low. A break below here creates a lower low.

 

 

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024