FxWirePro: Euro like to rise another 200 pips in current run

After yesterday’s CPI inflation print from the United States, which showed that the inflation rose more than expected in January, the market sharply sold the dollar. Inflation rose by 2.1 percent y/y in January, which was 0.2 percent more than what was widely expected. Even the core inflation print was higher than estimate at 1.8 percent y/y.

After the print, the euro was initially down but found support around 1.228 and there was no looking back from there for the single currency. The single currency is currently trading at 1.248 against the dollar and our calculations suggest that it is likely to rise further by at least 200 pips to test resistance around 1.27 area.

While higher inflation does mean greater chances of rate hikes from the U.S. Federal Reserve, it seems that the market is more focused on policy winding of other central banks and global reflation. Short term traders should maintain the stop loss around 1.235 area.