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Euro-zone flash CPI rose only 0.7% YoY in January, the same as in November, according to the flash estimate. It was expected to rise by 0.9% year on year, after rising 0.8% in December, but German weakness already pointed to a softer figure. These are the initial, flash figures for January. They will be revised later on. Core CPI rose 0.7% in December and moved up to 0.8% in January. The all-European unemployment rate was expected to remain unchanged at 12.1% but actually fell to 12%. The headline figure is very weak, and the somewhat better core number is not enough to compensate.

EUR/USD traded steadily in low ground, at around 1.3540 and is now under 1.3530.

EURUSD weaker after soft CPI flash estimate January 31 2014 technical 30 minutes forex cbart

Energy prices fell 1.2% and food, alcohol and tobacco rose 1.7%. As these are volatile numbers, the focus is on the bottom line figure and the core number, which remain at low levels.

Inflation is weak, but probably not enough to trigger a move right now. The ECB is more likely to hint about a move in February, and could set a negative deposit rate in March, assuming inflation remains so weak.

Signs for a weak rise in CPI were already received yesterday with the release of German flash CPI. Consumer prices in the euro-zone’s largest economy rose by 1.3%, lower than December. The HICP remained at 1.2%. Also Spain reported weaker than expected inflation numbers.

Earlier in the day, Germany reported a fall of 2.5% in retail sales for the month of December, while France saw a drop of 0.1% in consumer spending in December.

Support appears at 1.35, followed by 1.3430. Resistance is at 1.3550, followed by 1.2625. For more, see the EUR to USD forecast.