Today’s release of European inflation data is expected to show continued price pressures in the EU and may force the ECB to raise interest rates in the July meeting. While this may be a positive for the euro, technical signals have shifted against the currency following the 9 cent decline versus the dollar in less than 2-weeks.
Today’s Key Economic Data Releases
EUR – CPI y/y – 09:00 GMT
Expectations: 2.8%. Previous: 2.8%.
While the headline inflation number is expected to remain at 2.8%, the rise in commodity prices may have fed into other price pressures in the core inflationary reading which is expected to rise 1.5% from 1.3% y/y. While many economists argue that the rise in commodity prices are transitory, the ECB has attempted to prove its inflation fighting agenda with most market expectations for a second rate hike this year to come in the July meeting. Stronger inflationary pressures today would hint at this scenario and lend strength to the euro, albeit in the short term as the Greek aid package that was put together last year looks to be adjusted by EU officials.
A breach of the rising trend line from January and falling weekly stochastics hint at further declines in the EUR/USD. Support is found at 1.4020. A break here would open the door for increased selling of the pair to the 50% retracement of the January to May move at 1.3900. Resistance is found at Friday’s high of 1.4340.
CAD – Manufacturing Sales m/m – 12:30 GMT
Expectations: 1.6%. Previous: -1.5%.
The Canadian dollar has backpedaled lately following a decline in both oil prices and an overall dollar recovery. On Friday the USD/CAD found resistance at the 100-day moving average, a level that has proven to be resistive in the pair’s downtrend and the last time the USD/CAD tested this level was on March 15th. Support for the pair comes in at 0.9600 and 0.9510.
USD – TIC Long-Term Purchases – 13:00 GMT
Expectations: 57.7B. Previous: 26.9B.
The report is expected to show that foreigners increased their purchases of US financial instruments in the month of March but a release in line with expectations should do little to shift investor sentiment away from the dollar recovery which has stemming from the decline in commodity prices and increased pressures surrounding the Greek bail out.