The US Bureau of Labor Statistics (BLS) inflation report, scheduled to be released at 12:30 GMT, is expected to show a mixed set of inflation statistics for March. The headline inflation rate is seen falling from 6% in February to 5.2% in March, while the core reading – headline minus energy and food – is seen ticking 0.1% higher to 5.6%.
Later in the session, the minutes of the March 22 Federal Reserve policy meeting will be released. At this meeting, the Fed hiked rates by 25 basis points to a target rate of 4.75% to 5%, in line with market expectations, but pared back its prevailing hawkish language. The Fed noted that if risks emerged that could impede them from hitting their goals, ‘The Committee would be prepared to adjust the stance of monetary policy as appropriate….’ While still reaffirming their commitment to reducing inflation to target, the Fed’s tone was lighter than in past press releases and maybe a hint towards the central bank taking a more cautious approach to hiking rates. Today’s FOMC minutes will give the market greater clarity on the central bank’s current thinking.
There is little in the way of Euro Area economic news today to steer the single currency and that leaves EUR/USD at the bidding of the US dollar. The pair are currently trapped in a tight range today – 1.0909/1.0937 – and little is expected to happen ahead of the US inflation release. The daily EUR/USD chart does show a few positive signals and suggests that a retest of the recent multi-month high at 1.1033 may occur unless the greenback picks up a strong bid. All three moving averages are supportive of a move higher, while a basic cup and handle continuation pattern has been formed over the past two months.
EUR/USD Daily Price Chart – April 12, 2023
Retail Traders Remain Short EUR/USD
Retail trader data show 38.86% of traders are net-long with the ratio of traders short to long at 1.57 to 1.The number of traders net-long is 13.46% lower than yesterday and 18.23% higher than last week, while the number of traders net-short is 20.69% higher than yesterday and 5.83% lower than last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.