Today, on April 2nd, the common European currency gained 0,12% against the US Dollar. The market is waiting for the results of another ECB meeting scheduled for April 3rd. Meanwhile, experts say that lower inflation is currently threatening economic growth around the globe.
Yesterday, the OECD reported about a consumer inflation slowdown seen for 3 consecutive months. This makes traders and investors nervous about the near-term economic prospects of the world's biggest economies.
According to the analysis made by the OECD, the annual rate of inflation declined from 1,7% in January 2014 to 1,4% in February 2014. As for the G20 economies, which account for 90% of the global GDP, the inflation declined from 2,6% to 2,3% during the same reporting period.
The core inflation rate (excluding food and energy prices) remained the same at 1,6% a year. Still, 12 European countries indicated price decline during the reporting period.
Tomorrow we are to see the OECD is to publish its GPD report for Q4 2013. The forecasts are pessimistic. This may also trouble some central banks. Most of them are planning to reach the 2% inflation target. They think this is a necessary condition to see a healthy economic recovery. Lower rate of inflation doesn't allow governments and businesses to cut their liabilities. On top of that, when prices drop, consumers postpone their purchases to buy more of the stuff at the same price later. Needless to say that a consumer activity decline leads to negative processes in economies, thereby promoting deflation.
Central banks around the globe have already seen Japan and its central bank trying to overcome deflation for 2 decades.
Tomorrow we will witness the results of the ECB's meeting. This meeting is likely to be dedicated to the likelihood of deflation in the eurozone as well as the ways and means to prevent this phenomenon. The recent CPI data confirm the supposition that the eurozone may well face deflation if the local authorities fail to prevent it.
EURUSD Outlook
Not so long ago, Masterforex-V Academy analyzed the H4 chart of EURUSD to define the near-term prospects of the currency pair in terms of technical analysis after studying some fundamental factors, including those mentioned above.
The mentioned chart indicates a further rally of the common European currency.
This means the bias is still bullish. The blue vertical line indicates the transition to the new July futures of EURUSD (March 17th). We can see that the currency pair retraced a bit during this transition. The likely end of the retracement was on March 28th. At this point, EURUSD seems to have resumed the long-term rally
If to consider the mid-term prospects of the currency pair, the rally may encounter resistance at 1,3814 or even higher 1,3874. If the second level of resistance is broken, the next big level to watch is 1,3941. This is a major level since it defends the entire bearish retracement. If the price succeeds in consolidating above it, the long-term rally will definitely be resumed to hit 1.4000 and higher.
Alternatively, if the price continues the mid-term retracement and breaks below 1,3721, the next levels to hit are 1,3670 and 1,3561. If these levels are broken, we may consider a change of the mid-term tendency. In this case, the next level to watch is 1,3479.
