MyFXspot.com Trade Ideas

• EUR/USD: long at 1.1260, take profit at 1.1370, stop-loss 1.1205
• AUD/USD: long at 0.7150, take profit at 0.7300, stop-loss 0.7075
• XAU/USD: long at 1300.00, take profit at 1360.00, stop-loss 1270.00

Market Overview

The European Central Bank kept its ultra-easy monetary policy unchanged on Wednesday. ECB President Mario Draghi confirmed that policymakers were considering measures to mitigate the impact on banks of its negative deposit rates as well as the pricing of new cheap two-year loans to banks, but said it was too early to decide. "We need further information that will come to us between now and June," Draghi said. The ECB has already backtracked on plans to tighten policy but may be reluctant to do more as the root causes of the downturn, weak demand from abroad and political turmoil, are largely beyond its policy reach. At his regular news conference after the meeting, Draghi gave little away on any further planned stimulus measures but highlighted further downside risks linked to global trade tensions and other uncertainties. "Incoming data continue to be weak, especially for the manufacturing sector. The slower growth momentum is expected to extend into the current year," he said. Draghi added that a weakening of inflation would nonetheless "probably bottom" in September and that ECB Governing Council members recognized the underlying strength of the economy. "The estimated probabilities of a recession remain low," he concluded of the risk to the euro zone's economy.

U.S. consumer prices increased by the most in more than a year in March, but underlying inflation remained benign against the backdrop of slowing domestic and global economic growth. CPI rose 0.4%, boosted by increases in the costs of food, gasoline, and rents. That was the biggest advance since January 2018 and followed a 0.2% gain in February. In the 12 months through March, the CPI increased 1.9%. The CPI gained 1.5% in February, which was the smallest rise since September 2016. The market had forecast the CPI climbing 0.3% in March and accelerating 1.8% year-on-year.

Excluding the volatile food and energy components, the CPI nudged up 0.1%, matching February's gain. In the 12 months through March, the core CPI increased 2.0%, the smallest increase since February 2018. The core CPI rose 2.1% year-on-year in February.
The Fed, which has a 2% inflation target, tracks a different measure, the core personal consumption expenditures price index, for monetary policy. The core PCE price index increased 1.8% on a year-on-year basis in January after a rising 2.0% in December. It hit the Fed's 2% inflation target in March last year for the first time since April 2012.

Inflation has remained muted, with wage growth increasing moderately despite tightening labor market conditions. The tame inflation environment, together with slowing economic activity, support the Federal Reserve's decision last month to suspend its three-year campaign to raise interest rates. The U.S. central bank dropped projections for any rate hikes this year after increasing borrowing costs four times in 2018.

Monday-Tuesday EUR rebound lost its way after testing the 21-day moving average. But long lower wick on today's candlestick suggests the recent EUR/USD rebound may last longer. In our opinion short-term EUR/USD outlook is bullish and we opened a long position at 1.1260. A break above a 38.2% Fibo at 1.1284, 1.1448-1.1183, will support our view.