CORE INFLATION IN THE US COMES IN ABOVE FORECASTS
The EUR/USD price demonstrated positive dynamics following the news from Germany that Angela Merkel reached a preliminary agreement on a coalition. This will allow parliament to form a new government with Merkel in the role of Chancellor. Euro bulls are also being supported by the last ECB meeting minutes where hints were given on future monetary tightening in the monetary union. The pair was strongly impacted by the consumer price index and retail sales reports in the US for December. Consumer inflation grew 0.1% in the last month of 2017 which was in line with the forecast, but the core consumer price index increased by 0.3% which was 0.1% above average expectations. Confident growth of inflation in the US will allow the Fed to tighten monetary policy during the year. The expectation is for three to four interest rate hikes in 2018 and that will have a positive impact on the greenback. The retail sales in December slowed the pace of growth from 0.9% to 0.4%, but the core retail sales indicator that excludes car sales increased by 0.4% which is 0.1% better than expected.
The USD/JPY is growing amid a rising US dollar and lower than forecasted current account balance surplus in Japan that in November was only 1.70 trillion yen versus the 2.19 trillion yen anticipated. Despite the positive data on the Chinese trade balance surplus of 54.7 billion USD against the forecasted 36.9 billion dollars, the AUD/USD lost positions because of the slow increase in China’s imports of just 4.5% in December. China is the key importer of Australian goods.
The EUR/USD price was able to renew multi-year highs and this is the basis for continued growth to 1.2200. The RSI on the 15-minute chart is still close to the overbought zone which points to a possible rollback amid profit taking ahead of the weekend. The downward correction is possible to 1.2070.
The USD/JPY was not able to overcome the support at 111.00 and as a result rebounded upwards. The MACD signal line has changed direction to positive but has not crossed the zero point yet. The increase potential maybe exhausted due to the RSI on the 15-minute chart being in the overbought territory. The possible targets in case of further increases will be 112.00 and 113.00.
The AUD/USD has crossed the SMA100 on the 15-minute chart and keeps falling after an unsuccessful attempt to overcome the 0.7900 resistance. In case of further falls, the signal to sell may come from breaking through 0.7800 mark and the targets in this case will be 0.7740 and 0.7635. The possible increase is likely to be limited by the 0.7900 resistance level.