EUR/USD: Investors shrugged off Eurozone data, eyes on FOMC minutes today
Macroeconomic overview
U.S. Federal Reserve meeting minutes due later on Wednesday could either reinforce or undermine recent hawkish comments from central bank policy makers that have raised bets on a rise in rates as early as next month.
Cleveland Fed President Loretta Mester said on Monday that she would be comfortable raising rates at this point if the economy maintained its current performance. Philadelphia Fed President Patrick Harker said on Monday that he would support a rate increase at a mid-March policy meeting as long as inflation, output and other data continued to show the U.S. economy is growing. But as we wrote yesterday, their comments brought nothing new to market expectations.
We think that the likelihood of Fed hike in March is very low. Our baseline scenario is a hike in June.
Euro zone inflation rose to an annual rate of 1.8% in January, the European Union statistics agency said today confirming its earlier estimates. Stripped of the volatile components of energy and unprocessed food, an indicator closely watched by the European Central Bank, the annual inflation rate in January was 0.9%, confirming Eurostat's earlier estimate and the market consensus.
Ifo economic institute said its business climate index for Germany rose to 111.0 from a upwardly revised reading of 109.9 in January. The reading came in far stronger than market consensus forecast for a value of 109.6. This is another sign of bright recovery of Eurozone economy after yesterday’s PMI readings.
The EUR/USD fell below 1.0500 today. Investors keep shrugging off rising inflation and strong macroeconomic data from the Eurozone. We think that a corrective move is likely after today’s FOMC minutes, because we think they will not point to a hike next month and this may disappoint USD bulls.
Technical analysis
The EUR/USD broke below the support at 1.0522. The next target of EUR/bears is 1.0451 (76.4% fibo of January-February rise) and then full retracement to the January 1.0340 base. Declining 14-day exponential moving average at 1.0616 weighs heavily on the market. 
Trading strategy
Our long was stopped below 1.0522 support. We stay sideways now, as the outlook is unclear for now. Fundamental factors suggest a recovery in the EUR/USD. But the EUR is weakening despite accelerating inflation and recent much-better-than-expected macroeconomic indicators from the Eurozone. What is more, FOMC roster in 2017 is more dovish than it was in 2016 and we had no hint on timing of next hike in the previous FOMC statement, so we think that the likelihood of March hike is very low. A comeback to fundamental trading may result in rapid EUR/USD recovery, but for now technical analysis suggests a continuation of bearish move to 1.0340.