Today is inflation day or CPI (consumer price index) as it is called, which is a trading event for forex traders. The Japanese inflation report was released early in the morning and it was yet another miss. Besides that, unemployment jumped from 2.8% to 3.1%, but that´s another story, because employment in Japan is a different story from what we´re used t see in the West.

In Europe, inflation came out a point lower compared to the previous month, but still a point better than expectations/consensus.  

Although, the surprise came from the core CPI number. Last month´s reading came at 0.9% and this time it was expected to be at 1%. The actual reading was 1.1%.

Yeah, I know it doesn´t look like much, but it actually is. If core inflation jumps by 0.2% (or even 0.1%) a month, then by the end of the year we´ll reach 2%.

That is the target for most central banks but this is the core inflation, which usually runs below the normal inflation numbers, so if core inflation reaches 2%, then CPI should be around 2.2%-2.3% at least.

We´re a long way from seeing 2% inflation, but we´re headed in the right direction. Imagine if CPI got anywhere close to 2%; I am already hearing screams in my head coming from the Germans.

Anyway, that´s a decent report and the Euro is a tad better off as I speak. EUR/USD has been retracing lower during the morning, but now it looks like the retrace is over.

Stochastic is oversold on the hourly forex chart and the 50 SMA is providing some solid support. As you can see from the chart above, the hourly candlestick is closing as a hammer, which is a reversing signal. We opened a buy forex signal here a while ago, and at the moment it looks good. Let´s see how this forex trade will evolve.  

Is the pullback over?

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