EUR/USD Forecast: Breakout imminent on US inflation data
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get Premium without limits for only $9.99 for the first month
Access all our articles, insights, and analysts.
UNLOCK OFFER- EUR/USD has extended its sideways grind into a third straight day.
- The pair has the potential to move sharply in either direction.
- US inflation data is likely to trigger a significant market reaction.
EUR/USD has been struggling to make a decisive move since the beginning of the week with market participants remaining on the sidelines ahead of the key US inflation data. The technical outlook suggests that the pair could break out in either direction.
Although Reuters reported earlier in the day that eurozone money markets are currently fully pricing in a 50 basis points (bps) European Central Bank (ECB) rate hike in September, the shared currency is having a difficult time finding demand. Germany’s Finance Minister Christian Lindner said earlier in the day that the German economic outlook was looking fragile.
In the second half of the day, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for July. The annual inflation is expected to decline to 8.7% from 9.1% in June, while the Core CPI, which strips volatile food and energy prices, is forecast to move higher to 6.1% from 5.9%.
The market reaction to the inflation data should be pretty straightforward with a strong Core CPI print triggering a dollar rally and a soft reading causing the greenback to lose interest. According to the CME Group FedWatch Tool, markets are pricing in a 66.5% probability of the Fed opting for a 75 bps rate increase in September, suggesting that there is room for a significant response in the US Dollar Index if the data diverges from market consensus.
EUR/USD Technical Analysis
The symmetrical triangle that seems to have formed on the four-hour chart confirms the view that the pair is about to break out of its range. On the upside, 1.0230/1.0240 (Fibonacci 38.2% retracement of the latest downtrend, 200-period SMA on the four-hour chart) aligns as key resistance. With a weak CPI print, the pair could rise above that level and target 1.0300 (psychological level, Fibonacci 50% retracement) and 1.0370 (Fibonacci 61.8% retracement.
Significant support is located at 1.0200 (psychological level, 100-period SMA, 50-period SMA). If the dollar regathers strength on a hot inflation report, the pair could pierce through that support and extend its decline toward 1.0150 (Fibonacci 23.6% retracement) and 1.0100 (psychological level, static level)
- EUR/USD has extended its sideways grind into a third straight day.
- The pair has the potential to move sharply in either direction.
- US inflation data is likely to trigger a significant market reaction.
EUR/USD has been struggling to make a decisive move since the beginning of the week with market participants remaining on the sidelines ahead of the key US inflation data. The technical outlook suggests that the pair could break out in either direction.
Although Reuters reported earlier in the day that eurozone money markets are currently fully pricing in a 50 basis points (bps) European Central Bank (ECB) rate hike in September, the shared currency is having a difficult time finding demand. Germany’s Finance Minister Christian Lindner said earlier in the day that the German economic outlook was looking fragile.
In the second half of the day, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for July. The annual inflation is expected to decline to 8.7% from 9.1% in June, while the Core CPI, which strips volatile food and energy prices, is forecast to move higher to 6.1% from 5.9%.
The market reaction to the inflation data should be pretty straightforward with a strong Core CPI print triggering a dollar rally and a soft reading causing the greenback to lose interest. According to the CME Group FedWatch Tool, markets are pricing in a 66.5% probability of the Fed opting for a 75 bps rate increase in September, suggesting that there is room for a significant response in the US Dollar Index if the data diverges from market consensus.
EUR/USD Technical Analysis
The symmetrical triangle that seems to have formed on the four-hour chart confirms the view that the pair is about to break out of its range. On the upside, 1.0230/1.0240 (Fibonacci 38.2% retracement of the latest downtrend, 200-period SMA on the four-hour chart) aligns as key resistance. With a weak CPI print, the pair could rise above that level and target 1.0300 (psychological level, Fibonacci 50% retracement) and 1.0370 (Fibonacci 61.8% retracement.
Significant support is located at 1.0200 (psychological level, 100-period SMA, 50-period SMA). If the dollar regathers strength on a hot inflation report, the pair could pierce through that support and extend its decline toward 1.0150 (Fibonacci 23.6% retracement) and 1.0100 (psychological level, static level)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.