EUROPEAN session review: Dollar still falling

Data released: 

07:00 GMT Germany Harmonised Index of Consumer Prices (YoY) (Jan) 1.2% 1.2% 1.2% 

07:00 GMT Germany Consumer Price Index (MoM) (Jan) -0.6% -0.6% 0.4% 

07:00 GMT Germany Consumer Price Index (YoY) (Jan) 1.3% 1.3% 1.4% 

07:00 GMT Germany Harmonised Index of Consumer Prices (MoM) (Jan) -0.7% -0.7% 0.5% 

08:15 GMT Switzerland Producer and Import Prices (MoM) (Jan) 0% 0% 0% 

08:15 GMT Switzerland Producer and Import Prices (YoY) (Jan) -0.3% -0.4% -0.4% 

The dollar fell versus tha main currencies without apparent reasones before a report today forecast to show U.S. retail sales stalled. 

EURO 

The ECB says that data from the Survey of Professional Forecasters indicates a sharp downward revision for HICP in 2014 to 1.1% from a previous estimate of 1.5%. The estimate for 2015 was also lowered to 1.4% from 1.6%. The fresh 2016 forecast was pegged at 1.7% and the long-term estimate was left unchanged at 1.9%. 

EUR/USD recovered to $1.3660. Initial resistance remains at $1.3680, extending to $1.3740 (Jan 24 highs).The initial support remains at recent lows on $1.3550 (Feb 2 lows), then - at $1.3480. Below support comes at $1.3400 (Nov 21 lows). 

POUND 

The dollar eased against the British pound, as markets digested the U.K. central bank’s upward revisions to its economic growth forecast this year. 

The Bank of England on Wednesday raised its growth forecast of the U.K. economy to 3.4% this year, up from a previous projection of 2.8%. The central bank also said the unemployment rate has fallen faster-than-expected and is likely to reach the 7% threshold by the spring of this year. 

The bottom line is that while the general view remains of a risk of a BOE rate hike in Q1 2015, many observers and investors see heightened risk of an earlier hike, as in late 2014. The market went into this week thinking that it was a close call who would raise rates first the Fed of the BOE, Yellen seemed ultimately more convincing than Carney. 

GBP/USD is testing the upper limit of 1.6250-1.6670 range. If it would be broken it would open the door to nearest target at 1.6740. If the resistance at 1.6670 would stay, the pair will back to the 1.6580 area. 

YEN 

Yen consolidates near session maximums versus the dollar. 

USD/JPY stays near Y102.00, lower the initial resistance at Y102.70 (yesterday’s high). Above resistance comes at Jan 31 high on Y102.90/00, then - at Y103.40 (Jan 28 high). Initial support comes at Y101.20 (Feb 6 lows), then - at Y101.00. 

DATA AHEAD 

At 15:00 GMT Dec Business Inventories come. Analysts expect 0.5% gain after 0.4%. 

At 15:00 GMT Fed's Yellen speak.

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