EUR/USD Long Opened At 1.1320, Take Profit At 1.1500
EUR/USD trading strategy
Trading strategy: Long
Open: 1.1320
Take profit: 1.1500
Stop-loss: 1.1230
Analysis: We used yesterday’s EUR/USD drop to open a long position at 1.1320. The EUR/USD is back above 7-day exponential moving average (1.1354) and 23.6% Fibo of September-November fall (1.1357). The target is at 1.1500. In our opinion, Thursday’s ECB statement will not weaken the EUR/USD structure as many bad news have been already priced in and downward revisions to macroeconomic forecasts will not surprise the market.
Macroeconomic overview
U. S. consumer prices were unchanged in November, held back by a sharp decline in the price of gasoline, but underlying inflation pressures remained firm amid rising rents and healthcare costs.
The strength in underlying inflation reported by the Labor Department on Wednesday supports views that the Federal Reserve will raise interest rates at its December 18-19 policy meeting. The U.S. central bank has hiked rates three times this year.
November's flat reading in the CPI, which was the weakest in eight months, followed a 0.3% increase in October. In the 12 months through November, the CPI rose 2.2%, the smallest gain since February, after advancing 2.5% in October.
Excluding the volatile food and energy components, the CPI climbed 0.2%, matching October's gain. That lifted the year-on-year increase in the so-called core CPI to 2.2% from 2.1% in October.
Last month's inflation readings were in line with market expectations.
Despite the firmness in core consumer prices, the overall inflation outlook is benign amid falling oil prices and signs of slowing economic growth both in the United States and overseas.
A report on Tuesday showed producer prices edging up 0.1% in November after accelerating 0.6% in October.
The Fed's preferred inflation measure, the core PCE price index excluding food and energy, increased 1.8% year-on-year in October, the smallest gain since February, after rising 1.9% the prior month. It hit the U.S. central bank's 2% target in March for the first time since April 2012.
The market expects the core PCE price index to hover below that target for much of 2019, which they say could see the Fed temporarily halting interest rates hikes.
Minutes of the Fed's November policy meeting published last month showed nearly all officials agreed another rate hike was "likely to be warranted fairly soon," but also opened debate on when to pause further monetary policy tightening.
Traders expect no more than one rate increase in 2019. In its last forecasts in September, the Fed projected three rate hikes in 2019.