The forex markets showed rather muted response to the latest batch of economic data released today. Euro has continued its near-term recovery, unaffected by Eurozone’s lower than expected CPI flash data coming. This lack of response likely stems from the understanding that a slight miss in CPI figures does not significantly alter ECB plans for a rate cut in June, supported by a growing consensus within the bank. Notably, even the more conservative members of ECB Governing Council have signaled openness to adjusting rates in June, further cementing expectations.

On the other side of the Atlantic, Dollar has also remained stable despite stronger than expected ADP private job data, with marked acceleration in annual wage growth for job-changers. This tepid response suggests that traders are likely waiting for the more comprehensive non-farm payroll report before making any decisive bets. With Fed fund futures currently indicating less a 60% chance of Fed rate cut in June at this point, a strong set of NFP numbers could easily sway the balance.

As the week progresses, Australian Dollar and Dollar are currently the frontrunners, followed by Euro. Meanwhile, Swiss Franc, Sterling, and Yen are lagging behind, with Canadian and New Zealand Dollars occupying the middle ground.

The euro is showing little movement on Wednesday. In the European session, EUR/USD is trading at 1.0877, up 0.05%. The H1 chart reveals a corrective pattern towards 1.0847, with an expected shift towards 1.0783 to commence a decline phase. A new consolidation range at these levels could lead to further correction to 1.0888 or a downward wave to 1.0694 upon a breakout. The Stochastic oscillator, positioned above 80, anticipates a significant drop to the 50 mark, potentially leading to further declines. Watch 1.0920 as stiff resistance 

Eurozone inflation ticks lower

Inflation in the eurozone continues to decline. March CPI eased to 2.4% y/y, down from 2.6% in February and below of the market estimate of 2.6%. This matched November’s 28-month low and was driven by the continued slowdown in food inflation. Monthly, CPI rose to 0.8%, up from 0.6% but below the forecast of 0.9%.

Core CPI also declined, with a reading of 2.9% y/y. This was below the February gain of 3.1% and just shy of the market estimate of 3.0%. Core CPI, which is considered more significant than the headline release, has declined for an eighth straight month and dropped to its lowest level since February 2022. Germany’s inflation report, which was released yesterday, also indicated that inflation dropped in March, with headline CPI easing to 2.2% and core CPI to 3.3%.

Hardly.

First, it is important to note that in 2023 there was a sharp reversal of trend around the 152.00 level due to intervention by the Japanese authorities, which supported an excessively weak yen. Therefore, crossing this psychological threshold can serve as a trigger for a new intervention.