Mid-Day Report: Dollar Continues to Consolidate Despite Strong CPI Report

Daily Forex Fundamentals | Written by ActionForex.com | Aug 14 08 12:57 GMT |

Headline inflation in US accelerated much more than expected to 5.6% yoy in Jul, the biggest jump in 17 years. Core CPI also climbed more than expected to 2.5% yoy. Jobless claims, on the other hand, remains elevated at 450k. Markets should little reaction to the data as strong inflation alone is not enough to push Fed to remove prior policy accommodations quicker. Bottoming in economic slowdown and housing recession is still the key. Nevertheless, note that there is some sign off topping in gold and oil's, more upside in the greenback in still in favor after finishing the current consolidation. Released earlier, flash estimate for Q2 GDP in Eurozone showed contraction of -0.2% qoq. Year on year growth slowed for a third straight quarter to 1.5%. Underlying components are not yet available but slowing demand and domestic spending are believed to be the reason behind the down turn. A separate report showed final HICP inflation in Eurozone was revised down to 4.0% yoy in Jul. Euro was unmoved by the data too. EUR/JPY Mid-Day Outlook Daily Pivots: (S1) 161.89; (P) 162.89; (R1) 164.39; More. EUR/JPY continues to consolidate above 161.38 today. With 4 hours MACD staying above signal line, further sideway trading could be seen but consolidation should be relatively brief as long as 164.40 minor resistance holds. Below 161.38 will indicate recent decline has resumed for mentioned 158.60 cluster support (61.8% retracement of 151.71 to 169.96 at 158.68). Though, touching of 164.40 resistance will indicate that a short term bottom is in place and bring lengthier consolidation. But break of 166.87 support turned resistance is needed to indicated that fall from 169.96 has completed. Otherwise, further decline is still in favor after consolidation. In the bigger picture, EUR/JPY is at a critical moment now. Firstly, bearish divergence conditions are being displayed in weekly MACD and RSI. Secondly, monthly MACD remains below signal line. Both are arguing that upside momentum is unconvincing. More importantly, completion of rise from 151.71 now put long term rising channel support (now at 158.58) back into focus. Sustained break of which will indicate that whole long term up trend from 88.97 (00 low) has completed too. Focus will then be shifted further down to 149.27 key medium term support for confirmation. On the upside, above 170 psychological resistance is now needed to confirm underlying momentum. Otherwise, downside risks will continue to grow. Forex News Digest Overnight News Recap: German and French GDP Falls, German CPI Up, EU CPI Down Euro Zone CPI Growth Stable at 4.0% in July Euro Zone GDP Contracts 0.2% As Expected in Q2 ECB's Monthly Bulletin Echoes Trichet's Aug 7 Remarks U.S. Consumer Prices Rise Twice as Much as Estimated on Energy, Food Costs Euro Trades Near Weakest in 5 1/2 Months Against Dollar as Economy Shrinks Australian, New Zealand Dollars Strengthen as Commodity Prices Advance Canadian Dollar Climbs for a Third Day as Commodities Including Gold Gain Pound May Extend Decline to 192.48 Yen on Technical Charts, Citigroup Says More Forex News Economic Indicators Update GMT Ccy Events Actual Consensus Previous Revised 23:50 JPY Japan Tertiary industry index Jun -0.80% -0.30% -0.20% 06:00 EUR Germany GDP Q/Q Q2 -0.50% -0.80% 1.50% 1.30% 06:00 EUR Germany GDP Y/Y Q2 1.30% 1.60% 1.80% 06:00 EUR Germany CPI final M/M Jul 0.60% 0.60% 0.30% 06:00 EUR Germany CPI final Y/Y Jul 3.30% 3.30% 3.30% 06:00 EUR Germany HICP final M/M Jul 0.70% 0.60% 0.60% 06:00 EUR Germany HICP final Y/Y Jul 3.50% 3.40% 3.40% 09:00 EUR Eurozone GDP Q/Q Q2 -0.20% -0.20% 0.70% 09:00 EUR Eurozone GDP Y/Y Q2 1.50% 1.60% 2.10% 09:00 EUR Eurozone HICP final M/M Jul -0.20% -0.10% 0.40% 09:00 EUR Eurozone HICP final Y/Y Jun 4.00% 4.10% 4.00% 12:30 USD U.S. Jobless claims 450K 445K 455K 12:30 USD U.S. Real earnings Jul -0.80% N/A -0.90% 12:30 USD U.S. CPI M/M Jul 0.80% 0.40% 1.10% 12:30 USD U.S. CPI Y/Y Jul 5.60% 5.10% 5.00% 12:30 USD U.S. CPI core M/M Jul 0.30% 0.20% 0.30% 12:30 USD U.S. CPI core Y/Y Jul 2.50% 2.40% 2.40%