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Tame Inflation Should Ease the Greenback

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Tame Inflation Should Ease the Greenback

The Euro continues to jockey at the upper end of the current range ahead of Wednesday’s Federal Reserve meeting that should go a long way toward determining the trajectory of the currency pair. Today’s recent release of consumer inflation will be very helpful to investors in determining potentially how the Fed will view the current state of affairs in the US. The light inflation will likely allow the Fed to move the goal posts and therefore push the EURUSD above resistance.

What most dollar bears are hoping for is a lowering of the unemployment rate threshold below the initial 6.5% stated by the Fed in earlier meetings. The headline CPI year over year figure came out at 1.1% compared to the 1.2% expected by economists. Month over month CPI increased by 0.1% in line with expectations. The core rates for inflation came out in line with expectations at 1.6%. Food prices at the wholesale level increased in February as grains and soft commodities climbed due to the weather, but the spillover has yet to be seen.

Earlier economic news in the Eurozone did little to help the Euro. The weaker than expected Zew Survey showed that the current situation improved to 51.3 from 50.0, but the expectations component unexpected fell sharply to 46.6 from 55.7.

The technical picture is solid for the EURUSD as momentum is strong with the MACD printing in positive territory with an upward sloping trajectory. A close above 1.3966 would confirm a breakout.

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