Dollar dips ahead of US CPI data

The greenback has retreated this morning ahead of the US CPI report later today, while additional updates from Mario Draghi and Mark Carney will also be in focus. 

Dollar and pound
Source: Bloomberg

Euro creeps higher

The euro is on the rise as the $1.11 region provided support for the single currency, but the US CPI data and statement from Mario Draghi at 1.30pm (London time) and 2.30pm (London time) respectively will provide volatility for the market. EUR/USD hasn’t recovered from the decline due to the front loading of the European Central Bank QE — it has only managed to stem the losses.

The recent economic indicators out of the US have been less than impressive, and even though jobs numbers have been strong consumers are not going out and spending money. A soft CPI report will keep it in the upward trend it has been in since March.

Mr Draghi has a history of taking the euro lower and while Greek uncertainty is still on the agenda, EUR/USD will stay in the long-term downward trend it has been in.

The $1.11 level is acting as support, and a move below it will bring the support at $1.10 into play. Any move to the upside will encounter resistance at $1.13, and the $1.14 region is a major level of resistance.

The pound is rebounding

GBP/USD has recouped its losses from the negative inflation reading during the week but the $1.57 mark is proving to be a difficult one to pass. Mark Carney is speaking twice today, the first time is at 12pm (London time) and the second time is at 2.30pm (London time). The market is keen to learn what Mr Carney’s thoughts are on UK deflation — whether it is a short-term blip or a more prolonged affair. 

GBP/USD is right in the middle of the $1.58-$1.55 range at the moment, and both levels are the respective upside and downside targets. The currency pair has been in an upward trend over the past two months but if $1.58 isn’t taken out it could fall back into the longer-term downward trend, with $1.50 being the medium-term aim.

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