No Change On The Horizon For The ECB

No change on the horizon for the ECB

• ECB‘s January meeting minutes were released yesterday, had a rather dovish tone, however, had little impact on the EUR. The minutes reveal that the Bank is not in a hurry even to communicate the start of a policy normalization. Some members expressed a preference for dropping the easing bias, however, it was decided that it was premature. Analysts consider it may be the case that the ECB may start discussing a possible policy normalization in the first semester 2018. EUR could weaken in the long run as the accommodating monetary policy period seems to be prolonged.
• EUR/USD traded in a rather sideways manner yesterday and any bearish tones were corrected during the day, staying well within the 1.2230 (S1) support line and the 1.2355 (R1) resistance level. We see the case for the pair to continue to trade in a sideways manner with some bearish tones, in the short term. Should the pair find selling orders along its path we could see it breaking the 1.2230 (S1) support level and aim for the 1.2100 (S2) support barrier. Should it find buying orders, we could see it breaking the 1.2355 (R1) resistance level and aiming for the 1.2455 (R2) resistance hurdle.

Weak Japanese inflation

• Japan’s headline and core CPI rate were released during the Asian morning, headline CPI rose from +1% to +1.4% and core CPI rate remained unchanged at +0.9%. The prints seem to be interpreted by analysts as weak. Despite headline CPI rate rising, the underlying inflation pressures are more evident by the Core CPI rate which remained unchanged. Lack of wage growth is cited as one of the main reasons for failing to increase the core inflation rate. We could see the JPY weakening over the long run should this situation continue.

Today’s other economic highlights:

• During the European morning, we get the German Detailed GDP for Q4, Riksbank’s meeting minutes will be released and Eurozone’s final inflation rate is due out for January.
• Later on, we get Canada’s inflation data for January. The headline CPI rate is forecasted to drop to +1.4% year on year (yoy) from previous reading of +1.9% yoy, while the core CPI rate’s previous reading was +1.2% yoy. Analysts view the case for the core CPI rate to remain somewhat muted. Should the actual prints meet the forecasts, CAD could weaken against its major counterparts.
• USD/CAD traded with a slightly bullish mood in the past few days, breaking the 1.2610 (S1) resistance level (now turned to support). We see the case for the pair to continue to trade in that manner in the short term as a possible substantial deceleration of the Canadian inflation data could overshadow current fundamental news and financial data. Should the bulls continue to be in the driver’s seat, we could see the pair breaking the 1.2800 (R1) resistance level and aim for the 1.2910 (R2). On the other hand, should the bears have the upper hand, we could see the pair breaking the 1.2610 (S1) support line and aim for the 1.2450 (S2) support level.
• As for today’s speakers, ECB’s Board Member Coeure, FOMC member Mester and FOMC member Williams speak.

EUR/USD

·Support: 1.2230(S1), 1.2100(S2), 1.1920(S3)
·Resistance: 1.2355(R1), 1.2455(R2), 1.2600(R3)

USD/CAD

·Support: 1.2610(S1), 1.2450(S2), 1.2350(S3)
·Resistance: 1.2800(R1), 1.2910(R2), 1.3080(R3)