With inflation hitting 2.1% in the States Credit Agricole think that dollar bulls have gotten ahead of themselves and they could be squeezed if inflation drops or remains unchanged. They say that a lower number will be the trigger to push EUR/USD higher and are looking for the pair to bounce to resistance at 1.3590 if the data plays out.
The CPI number is out tomorrow and the market is expecting it unchanged at 2.1% in the yoy headline number and also unchanged at 2.0% in the core.
March to April was a sizable jump to 2.0% from 1.5% so there might be an element of catch up from the weather (yes we can still point to the weather in the middle of summer
). It’s hard to gauge the trend in inflation until you’ve got several months worth of data but I don’t believe we will see it falling massively anytime soon. Inflation has been pretty consistent over the last couple of years but the factors are lining up to say the next trend will be higher rather than lower.
US CPI yoy 21 07 2014
Which way for US inflation on Tuesday?
Higher
Lower
Unchanged
