Volatile German CPI has the euro looking worried

EURUSD is suffering a loss of faith in inflation

The euro has been dropping, helped by the German regional CPI numbers popping up.

The y/y numbers have been very volatile of late. If we take Hesse for example, they went from 0.8% in Nov to 1.9%, 2.4%, 2.5%. 1.7%. Those are sizeable swings in a short space of time.

North Rhine is just out too and has come in at 1.7% vs 2.3% y/y, so another wild swing there too.

Draghi will be sitting with a wry smile on his face at these numbers as it gives some credence to his call that inflation is temporary. But, as the ECB are quick to say that one data print don"t mean anything, we"ll assume they have to use the same excuse for this one. Like hell they will ;-)

Data aside, what we do have is EURUSD printing another failure up around 1.0800. Yes we broke the levels to run into 1.09 but as I"ve frequently pointed out, much of the euro"s rise has been down to USD weakness. What I want to see is real EUR strength.

EURUSD H4 chart

For the euro to go back up it needs to do all the hard work again. We"re already finding it tough to get back above an old S&R area around 1.0760/70, and 1.0800 is going to be a challenge again.

The next support comes in around the 100 H4 ma at 1.0726, then 1.0700/10.

The next decent support comes in around a trio of moving averages. The 55 dma at 1.0672, 200 H4 ma at 1.0652 & 100 dma at 1.0633. 1.0625/30 is also another S&R level.

That area is where I started loading my long position, and I like the look of it, so that"s where I"ll look to add back the position I took off the other day at 1.0800. If this rally is to continue, those are the levels that need to stand firm, or greater losses will come.

Volatile German CPI has the euro looking worried
Volatile German CPI has the euro looking worried
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