Today, in addition to the important American block of data( industrial production and the University of Michigan index), the market focus was on the long-awaited figures of European statistics-inflation data.
It is worth to recall that the European inflation is the most important statistical indicator, especially in the conditions when the market for two months now expects that the ECB will gradually begin to implement its plan to reduce measures to support the European economy.
Thus, data on inflation in the euro area were expected throughout the week and of course were in the spotlight today. As a result, Eurostat-the statistical bureau of the European Union, announced that inflation in the European Union for February fell to 1.1% compared to initial expectations of 1.2%, which is certainly weaker than the January value of 1.3%. With such inflationary growth, no need to say that ECB will pass to the abolition of the quantitative easing program before the end of this year.
In general, the released statistics fundamentally change the medium-term picture of the further development of the main FX market pair. If for the stock markets, low inflation and continuation of the supportive policy is a positive moment, for the European currency it is a negative medium-term signal.
Immediately after the release of the data, EUR / USD currency pair strengthened the decline. Previously, the pair was trading in close proximity to the level of 1.2300, the nearest support level. The weakening of the European currency began yesterday just after the release of quite positive data on the US currency. With the passage of 1.23, the next target of the pair will be level 1.2185- the lower boundary of the medium-term side channel $ 1.2185- $ 1.2510. Also worth noting is that level 1.23 is the kind of balance level of this wide channel. There is no doubt that the pair in its decline will reach the lower limit of 1.21, but the decrease will increase when the price activate stop orders concentrated in the zone $1.2300-$1.2275. At the same time, we maintain our forecast for the strengthening of the European currency in the medium-term time frame (3-5 months) and belive that EUR/USD will reach levels in the region of $ 1.25- $ 1.26.
Our recommendation - sell after the passage of the zone $ 1.2300- $ 1.2275