Fundamental Analysis: Core CPI
The Core Consumer Price Index (NYSEARCA:CPI) measures the changes in the price of goods and services excluding food and energy.
The CPI measures price change from the perspective of the consumer.
It is a key way to measure changes in purchasing trends and inflation in the US.
A higher than expected reading should be taken as positive/bullish for the USD (as the common way to fight inflation is raising rates, which may attract foreign investment), while a lower than expected reading should be taken as negative/bearish for the USD Analysts predict a future reading of 0.10%.
The Euro broke the resistance specified in yesterday’s report 1.2735, and advanced as it was expected after this break, only to stop clearly before our suggested target 1.2801. Technically, the most important event of the past 24 hours was a new touch of the top of the rising channel on the hourly chart, as if the Euro is seeking to score a record in how many times it is touching its channel. This clearly shifts all lights to the top of this channel, this area deserves our absolute attention, The Euro & the Dollar, are both in a “make it or break it” situation! The importance of (at least) the 5th test of this channel top is absolutely enormous, it is the single most important factor in determining medium term direction: from here we will see the Euro soaring for hundreds of pips, of the Dollar dragging it down for hundreds of pips. Short term resistance is at yesterday’s top 1.2768, if broken, we will jump to 1.2888, and may be then 1.2979. The support is at 1.2727, and a decisive break here will indicate that we are drifting away from the channel top, and will most probably lead to a hard fall to 1.2607, and may be 1.2542.
• 1.2727: the rising trend line from yesterday’s low on intraday charts.
• 1.2607: last Friday’s low.
• 1.2542: the slowly rising trend line from.
• 1.2776: yesterday’s top.
• 1.2888: April 20th low.
• 1.2979: May 4th low.
In yet another move of its conflicting move which covered the last 2 days, the Dollar/Yen moved back to the direction concordant with the shooting star pattern on the daily chart, as it broke the support specified in yesterday’s report 88.42, but the following shallow move bottomed at 88.00. We still believe that the wave count we introduced last week is providing us with the most probable scenario: we are in a wave 4 correction (please refer to the attached chart). Short term resistance is at 88.64, and breaking it would mean that the Dollar will continue to capitalize on its latest bounce, which will ideally target Fibonacci levels for wave 3: 89.52 & 90.13. Support is at 88.00, and breaking it would indicate a continuation of the drop to 87.35 & 86.47. This pair is going as expected, in the expected direction, and in convergence with our negative technical outlook for the medium term. We absolutely expect the fall to continue on the medium term. But we should not neglect the enormous possibilities of a bounce up targeting Fibonacci levels: a bounce is highly probable, and it is most likely to be just a temp, but the trend is down without a shadow of a doubt!
• 88.00: Asian session low.
• 87.35: an obvious support area on the hourly chart, and Dec 9th 09 low.
• 86.47: previous well known support.
• 88.64: the falling trend line from Wednesday’s high on intraday charts.
• 89.52: Fibonacci 50% for the wave 3 dive (from 92.09).
• 90.13: Fibonacci 61.8% for the wave 3 dive (from 92.09).
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