EUR/USD: Long In Anticipation For Bullish Resumption Trade Ideas

  • EUR/USD: long opened at 1.1480, take profit at 1.1720, stop-loss 1.1370
  • USD/JPY: short opened at 108.50, take profit at 105.50, stop-loss 110.00
  • USD/CAD: sell at 1.3350, take profit at 1.3010, stop-loss 1.3485AUD/USD: buy at 0.7145, take profit at 0.7350, stop-loss 0.7050

Market Overview

U.S. consumer prices fell for the first time in nine months in December amid a plunge in gasoline prices, but underlying inflation pressures remained firm as rental housing and healthcare costs rose steadily.

U.S. CPI dipped 0.1% last month, the first drop and weakest reading since March, after being unchanged in November. In the 12 months through December, the CPI rose 1.9%, slowing from November’s 2.2% gain.

Excluding the volatile food and energy components, the CPI increased 0.2%, advancing by the same margin for a third straight month. In the 12 months through December, the so-called core CPI rose 2.2%, matching November’s increase.

December’s inflation readings were in line with market expectations. The CPI rose 1.9% in 2018, slowing from a 2.1% increase in 2017. But the core CPI jumped 2.2%, up from 1.8% in 2017.

The Fed, which has a 2% inflation target, tracks a different measure, the core personal consumption expenditures (PCE) price index, for monetary policy.

The core PCE price index increased 1.9% year-on-year in November after rising 1.8% in October. It hit 2% in March for the first time since April 2012.

The U.S. central bank has forecast two interest rate hikes this year, but several policymakers, including Chairman Jerome Powell, have said they would be cautious about tightening monetary policy.

Powell reiterated that view on Thursday, saying “especially with inflation low and under control we have the ability to be patient and watch patiently and carefully” while the central bank monitored economic data and financial markets for risks to growth.

Low inflation is boosting households’ purchasing power, which could keep consumer spending supported. While the economy likely posted strong growth in the fourth quarter, an ongoing partial shutdown of the federal government is casting a cloud on the economy.

Inflation-adjusted average weekly earnings surged 0.7% in December, the biggest gain since August 2015, after slipping 0.1% in November. Weekly earnings increased 1.2% in the 12 months to December, the most since July 2016, from 0.6% in November.

EUR/USD bulls could build a base ahead of the daily cloud top, which has sunk to 1.1434, a mere one pip below the 1.1435 Fibonacci level, a 38.2% retrace of the 1.1216 to 1.1570 (November to January) rise. We opened long at 1.1480 in anticipation for a bullish resumption towards the 1.1586 Fibonacci level, a 61.8% retrace of the 1.1815 to 1.1216 (September to November) drop.

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