Euro decline slows ahead of CPI report
The euro spent the overnight session trading within a range of $1.250-$1.2560 as the US holiday has sucked volatility out of the market. Movements are anticipated to be low in the run up to the flash CPI and unemployment data, which are due out at 10am (London time). Deflation is a major concern for the European Central Bank so a reading below the 0.3% expectation is likely to renew a wave of EUR/USD shorting. OPEC’s decision to keep production rates unchanged has sent oil prices crashing which will keep the deflation fears on high alert in the coming months.
Turning our attention to the unemployment report, the consensus is for a level of 11.5%, which could mean no change from the September reading. I would put more weight on the inflation data but the jobless rate also feeds into the stagnation of the eurozone economy.
The euro has managed to break through $1.25 on several occasions this week but that was largely down to a pullback in the US dollar, which should not be confused with euro strength. The EUR/USD pair has been in decline since May and appears to be running out of steam. As Alastair McCaig stated, $1.24 has acted as support. If EUR/USD does clear $1.25 again, it is likely to run into resistance at the 50-day moving average of $1.2578. A move through this level will be required to help negate the downward trend.