Global macro overview for 29/02/2016:
The eurozone's CPI data was released this morning. It missed expectations coming in at -0.2%, short of the forecast of 0.0%. It was the lowest reading since March 2015. Moreover, core CPI came in at 0.7%, shy of the estimate of 0.9%; so both CPI readings dropped into negative territory in January. The conclusion is very simple here: weak numbers will put increased pressure on ECB Head Mario Draghi to take monetary action at the ECB policy meeting in March. Possible monetary moves include adopting negative interest rates and expanding quantitative easing scheme, which currently involves asset purchases of 60 billion euros a month. Each of these moves is likely to push the euro to lower levels, so markets will keep a close eye on the March ECB policy meeting.
From the technical point of view, the EUR/USD pair might drop even further below the level of 1.0711, which is the most important technical support level for this pair in the near term. Bears are clearly in control now; and as long as the level of 1.1059 is not violated, lower prices should be expected.
