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EUR/USD: Euro range-bound following mild upticks in CPI

H.S. Borji
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The euro remained range-bound against its US counterpart Thursday, as the EURUSD traded below 1.25 amid mild upticks in regional consumer inflation.

The EURUSD traded within a range of 1.2428-1.2483.The pair would subsequently consolidate at 1.2478, up 0.37 percent. The pair is testing the 1.2483 barrier. A break above this level would expose 1.2531 and 1.2563, the 20-day exponential moving average. On the downside, initial support is likely found at 1.2403.

The EURUSD is trading without direction after falling to a 26-month low of 1.2357 last Friday. The pair is caught between 1.24 and 1.25, finding buyers and sellers at each end of that range.

In other trading, the euro was up against the pound, which continues to suffer the ill effects of a pessimistic Bank of England Inflation Report. The EURGBP advanced 0.68 percent to 0.7931. The pair faces initial support at 0.7822 and resistance at 0.7946.

The euro advanced against the Japanese yen, as the EURJPY climbed 0.53 percent to 144.51. The pair faces initial support at 143.15 and resistance at 144.54.

In economic data, core Eurozone economies posted slight upticks in consumer inflation, although the preponderance of evidence was not enough to undermine the view the Eurozone economy would require additional stimulus measures to boost inflation and economic growth.

Italy’s consumer price index rose 0.1 percent in the 12 months through October, following a 0.2 percent decline the previous month. Italy’s harmonized index of consumer prices registered a year-on-year gain of 0.2 percent, official data showed.

Spain also witnessed a mild improvement in its annual CPI reading. Annualized consumer inflation declined 0.1 percent in October, following a 0.2 percent decline in September. The HICP rate declined 0.2 percent annually, following a 0.3 percent drop a month earlier.

France’s HICP rate edged up to 0.5 percent in October, following a 0.4 percent gain in September.

Germany, which accounts for about a third of Eurozone GDP, posted mixed results. Annual CPI was unchanged at 0.8 percent in October, the Federal Statistics Office said. The HICP rate weakened to 0.7 percent from 0.8 percent, thanks to a monthly decline of 0.3 percent.

The European Commission will post euro-wide CPI data Friday, along with a preliminary estimate of third quarter GDP growth. The Eurozone economy is forecast to increase 0.1 percent in the third quarter, following an upwardly revised 0.2 percent gain in the April to June period. Year-on-year, the economy is forecast to grow 0.7 percent.

Germany, which saw its economy contract unexpectedly in the second quarter, is expected to post a slight 0.1 percent gain in the three months through September. Year-on-year, Germany’s economy is expected to grow 1 percent.

Tomorrow’s GDP figures are unlikely to boost optimism in the Eurozone economy, which is expected to grow just 0.8 percent this year following two years of contraction.

The outlook on the EURUSD is mixed, as investors weigh an oversold technical range against decidedly weak fundamentals. The euro is expected to weaken further should the European Central Bank begin buying sovereign government bonds to help stimulate the region’s nascent recovery. According to analysts, that could happen as early as next year.

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