EUR/USD: Trading the Eurozone CPI Flash Estimate

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Eurozone CPI Flash Estimate, which is released at the end of each month, is an inflation index which measures the change in the price of goods and services charged to consumers. A reading which is higher than the market forecast is bullish for the euro.

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Wednesday at 9:00 GMT.

Indicator Background

Analysts consider CPI one of the most important economic indicators, and the release of Eurozone CPI can affect the direction of EUR/USD.

Eurozone CPI in February dipped to 0.5%, slightly short of the estimate of 0.6%. The markets are expecting a stronger showing for April, with an estimate of predicting a jump of 0.8%. Will the index meet or beat this prediction?

Sentiments and levels

Eurozone inflation indicators continue to look weak, and ECB head Mario Draghi has said that negative deposit rates or QE are on the table. If April inflation numbers fall further, deflation concerns could hurt the euro. The exchange rate of the euro remains high and Draghi may again step in if the euro approaches the “line in the sand” level of 1.40. In the US, we finally get top tier indicators for a “clean” month. Given some positive early indications for April, the numbers could certainly be strong. As well, an expected QE taper from the Feed later this week could help the greenback. Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.4055, 1.4000, 1.3905, 1.3830, 1.3785, and 1.3740.

5 Scenarios

  1. Within expectations: 0.3% to 0.9%. In this scenario, EUR/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
  2. Above expectations: 1.0% to 1.3%: A stronger reading than predicted could push the pair above one resistance line.
  3. Well above expectations: Above 1.3%: An unexpectedly sharp rise in inflation could push EUR/USD upwards, breaking a second resistance line.
  4. Below expectations: -0.1% to 0.2%: A lower than expected reading could pull the pair downwards, with one support level at risk.
  5. Well below expectations: Below -0.1%: In this scenario, EUR/USD could break below a second support level.

source

 

Market is pricing in that ECB will not do anything regardless of the data

 

Good article. I fully agree.

 

Judging from German inflation that fell 0.2% it will be some day tomorrow

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