17.01.201810:11 Forex Analysis & Reviews: All attention to the data on inflation in the euro area

The European currency managed to reverse the corrective decline in U.S. dollar pair and continued its growth on Tuesday, January 16, updating today's Asian session with new annual highs.

Good data on inflation in Germany and the expectation of an increase in the consumer price index of the eurozone in December 2017 continue to support risky assets along with good political news.

Many experts agree that a large coalition will be created at the Congress of the Social Democratic Party of Germany on January 21. It is in conjunction with a right-centrist political parties coalition in Germany, which includes the Christian Democratic Union of Germany and the Christian Social Union. If Angela Merkel manages to achieve the creation of a coalition, it will restore and strengthen her political figure, as well as, avoid new general elections due to the lack of a majority in the government.

News indicating Greece is capable of continuing good financial and economic results after the completion of the assistance program later this year, supported the European currency. As a number of experts noted, Athens simply needs to continue the reforms that they conducted on the EU requirements for financial assistance, which will lead to the strengthening of market confidence and the return of large investors.

The reaction to the completion of financial assistance and investor confidence can be traced by the yield of government bonds. In case of growth, Greece will be in a difficult situation once again. At present, the yield on 10-year securities is 3.77%.

Weak data on the U.S. economy also exerted some pressure on the US dollar.

Production activity in the area of responsibility of the New York Federal Reserve Bank declined in January 2018, due to the reduction of new orders and supplies.

According to the forecasted data from the New York Fed, the production index is 17.7 points in January 2018 against 19.6 points in December last year. Economists expected the index to be 18.5 points.

As for the technical picture of the EUR/USD pair, the return of buyers to a large market would only be possible after a breakout and consolidation at the level of 1.2275, which will lead to an increase in demand for risky assets and the renewal of new local highs around 1.2320 and 1.2390. In the case of weak data on inflation in the euro area, profit may be fixed after the sharp growth of the euro in early January, which will lead to a downward correction to the support area of 1.2150 and 1.2090.