EURO RISES AS APRIL INFLATION BEATS ESTIMATES

The euro rose today against its major peers after data from the European Union showed that inflation was higher than expected. In April, the CPI rose at an annualized rate of 1.9%, which was higher than the expected 1.6%. The core CPI, which measures the price of items excluding the volatile food and energy products rose by 1.1%, which was higher than the expected 1.0%. This rise in inflation is the highest since May last year. It increased chances that the ECB will wind down the asset purchasing program and start hiking rates after September.

The US dollar index fell today after the ADP data release yesterday. The data showed that private employers added 178K jobs in April, which was lower than the expected 186K. Corporate profits in the first quarter rose by 5.9%, which was lower than the expected 6.0%, but higher than Q4’s 1.6%. The preliminary GDP growth for the quarter was revised lower to 2.2% from last month’s 2.3%. However, there are signs that the GDP will start moving higher in the second quarter as companies ramp up investments in fixed assets.

The Canadian dollar rose sharply against the US dollar after the Bank of Canada (BOC) raised the possibilities of a rate hike. Yesterday, the bank left rates unchanged at 1.25%, which was expected by traders. If the bank hikes rates later this year, this will be the first time since January. In the statement yesterday, the bank said that higher interest rates would be needed to keep the inflation rates near target.

EUR/USD

The EUR/USD pair is currently trading at 1.1684, which is slightly lower than the intraday high of 1.1725. This is the highest level for the pair since Monday this week. The sell-off came as problems rocked Italy after the president vetoed the nominee of the economy ministry. The pair is trading in line with its 50-day moving average and slightly lower than the 25-day SMA. Today’s pullback happened as the pair’s RSI passed the overbought level. There is a possibility that the pair could continue moving higher after the current pullback.

USD/CAD

After soaring to a multi-month high of 1.3046, the USD/CAD pair fell sharply today to an intraday low of 1.2817. The loonie strengthened after a hawkish statement from the BOC. It’s MACD dropped to the lowest level in weeks, causing the pair to stabilize near the lows. The pair’s current price is close to the 25 and 50-day simple moving average. The MACD shows that while the pair could continue moving upward, traders should be cautious of the long trades.

NZD/USD

The NZD/USD pair rose sharply after hawkish statements from the RBNZ Bank Governor, Adrian Orr. The pair rose from a low of 0.6881 and reached an intraday high of 0.7017. It is now trading above the short and medium-term moving averages as shown below. After yesterday’s rise, the pair’s RSI has remained at elevated levels, which means that a pullback is inevitable. If it does, traders should watch out for the 0.6967 support.