EUR/USD analysis: break below 1.2200 confirms double top figure
|EUR/USD Current price: 1.2212
- Softer-than-expected local data prevented the greenback from strengthening further.
- US core PCE inflation to take center stage this Thursday.
Powell-driven dollar rally continued this Wednesday, with the EUR/USD pair breaking through the 1.2200 level for the first time since mid-January. The pair traded as low as 1.2193, but softer-than-expected US data prevented the greenback from rallying sharply. The US Q4 GDP second estimated resulted at 2.3%, slightly below the 2.4% expected, while PCE inflation in the same period rose 2.7%, also well above the first estimate, but slightly below market's forecast of 2.8%. Furthermore, the Chicago PMI for February missed expectations, printing 61.9 while Pending Home Sales fell by 4.7% in January, well below an expected 0.3% advance. Undermining the common currency was EU preliminary February inflation, that rose less than expected according to preliminary estimates, with the core yearly reading up 1.0%, below the forecasted 1.1%.
Thursday will bring the final revisions of Markit PMIs for the EU and the US alongside with official figures for this last, although the more relevant reading will be US January PCE inflation, Fed's favorite inflation measure. The yearly number is expected at 1.5%, while inflation is expected to come flat monthly basis, which may cool down expectations of a faster pace in rate hikes this year.
Technically, the pair is bearish and hovering around the neckline of a double-top figure of around 350 pips' height, not yet confirming it, but about to, which will theoretically implicate a decline of a similar extent. Short-term, and according to the 4 hours chart, the risk leans toward the downside, given that in the 4 hours chart, the pair is developing well below a bearish 20 SMA, which accelerates below the larger ones, while technical indicators pared their declines near oversold readings, rather reflecting the latest bounce than suggesting downward exhaustion.
Support levels: 1.2200 1.2165 1.2130
Resistance levels: 1.2240 1.2275 1.2310
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