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Consumer prices in the world’s largest economy rose an annualized 1.6 percent in January after climbing 1.5 percent the month prior, which was in line with economists’ expectations. Subsequent to the release, the greenback lost ground against most of its major counterparts. Traders will now shift their focus to comments from Bernanke due out at 15:00 GMT, and dovish comments by the central bank head could add additional weight onto the dollar.
Taking a look at the breakdown of the report, the core inflation reading rose 0.2 percent after climbing 0.1 percent the previous two months, while core prices from a year ago remain at 1.0 percent which is half of the central bank’s target. Indeed, the increase in the headline reading was fueled by higher prices for food and fuel.
It is also worth noting that the release trails the Federal Reserve's recent order of 19 of the largest U.S. banks to test their capital levels against the possibility of a renewed recession amid slack in the world's largest economy. The announcement is worrisome due to the fact that unemployment is unlikely to return back below 8 percent this year as businesses remain reluctant to add payrolls due to uncertainty in the U.S. economic outlook. As concerns remain, any dovish statement by central bank head Ben Bernanke later on today could place added pressure on the buck. Mr. Bernanke is expected to cross the wires at 15:00 GMT.
The EURUSD pushed higher subsequent to the in line inflation report. Taking a look at the 4 hour chart, bears will look for to enter around 1.36 as the descending channel dating back to February 2nd remains intact. So long as upside risks remain capped by 1.36, I do not rule out additional losses.
Written by Michael Wright, Currency Analyst
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly Forecast
source: dailyfx.com
Posted in: Forex
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