Lackluster Euro-Zone GDP, CPI to Fuel EUR/USD Losses

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

SEP

2017

09/29/2017 09:00:00 GMT

1.6%

1.5%

+1

+12

September 2017 Euro-Zone Consumer Price Index (CPI)

EUR/USD 5-Minute Chart

The Euro-Zone Consumer Price Index (CPI) held steady at an annualized 1.5% for the second consecutive month in September, while the core rate of inflation unexpectedly narrowed to 1.1% from 1.2% during the same period. The preliminary reading showed energy prices slowing to 3.9% per annum from 4.0% in August, with the cost for services also narrowing to 1.5% from 1.6%, while prices for Food, Alcohol and Tobacco increased an annualized 1.9% after expanding 1.4% during the previous month. Nevertheless, the initial dip in EUR/USD was short-lived, with the pair climbing back above the 1.1800 handle to end the day at 1.1812.

How To Trade This Event Risk

Bearish EUR Trade: 3Q GDP & October CPI Hold Steady

  • Need a red, five-minute candle following the report to consider a short EUR/USD setup.
  • If market reaction favors a bearish Euro position, sell EUR/USD with two separate lots.
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bullish EUR Trade: Euro-Zone Growth, Inflation Tops Market Forecast

  • Need a green, five-minute EUR/USD candle to consider a long Euro setup.
  • Carry out the same setup as the bearish Euro trade, just in reverse.

Potential Price Targets For The Release

EUR/USD Daily

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  • Downside targets remain on the radar for EUR/USD as a head-and-shoulders formation unfolds, with the both price & the Relative Strength Index (RSI) still preserving the bearish trends carried over from the summer months.
  • With the near-term outlook capped by the 1.1860 (161.8% expansion) region, a break/close below the 1.1580 (100% expansion) hurdle raises the risk for a move back towards 1.1480 (78.6% expansion) to 1.1500 (78.6% expansion) followed by the Fibonacci overlap around 1.1390 (61.8% retracement) to 1.1400 (61.8% expansion).
  • However, the pair may stage a more meaningful rebound from channel supports as the RSI struggles to push into oversold territory, with the first hurdle coming in around 1.1670 (50% retracement).
  • Interim Resistance: 1.2320 (23.6% retracement) to 1.2370 (61.8% expansion)
  • Interim Support: 1.1390 (61.8% retracement) to 1.1400 (61.8% expansion)

EUR/USD Retail Sentiment

Click Here to Learn How Shifts in Retail Position/Sentiment Impact Trend!

Retail trader data shows 40.8% of traders are net-long EUR/USD with the ratio of traders short to long at 1.45 to 1.

The number of traders net-long is 2.9% lower than yesterday and 0.6% higher from last week, while the number of traders net-short is 9.3% higher than yesterday and 0.3% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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