EUR/USD analysis: bullish breakout ahead of US CPI data

EUR/USD Current price: 1.1799

  • German´s economic strength leading EU's growth.
  • US inflation and retail sales figures taking center stage this Wednesday.

The EUR/USD pair surged to 1.1804 its highest since October 26th, when it shed roughly 150 pips following ECB's dovish stimulus cut. Following two weeks of consolidation, EUR bulls have finally got the needed excuse to retake their longs on another batch of solid German data. Different local releases showed that economic growth accelerated in the third quarter of the year, up to 0.8% vs. previous 0.6%. Also, the ZEW confidence survey indicated continued improvement in business sentiment, with the indicator up to 18.7 from previous 17.6, although below market's forecast of 20.0. For the whole EU, and according to the same survey, economic sentiment jumped to 30.9 from previous 26.7. Also, EU preliminary Q3 GDP was out but matched expectations at 0.6%.

The pair regained the 1.1700 figure and rallied well beyond it, even despite US producer prices rose by more-than-expected in October, with the index up to 0.4% monthly basis. In the 12 months through October, the PPI rose 2.8%, the largest increase in almost six years. The uptick in inflation at factory levels did little for the USD, as it won't move Fed's needle an inch when it comes to determinate the monetary policy. In the meantime, the dollar is being dumped on uncertainty surrounding the US tax reform. This Wednesday, the US will release October retail sales and CPI, this last seen growing below previous.

The EUR/USD pair trades around 1.1800 heading into the Asian opening, maintaining its strength upwards in the short-term and according to technical readings in the 4 hours chart, as technical indicators head north within overbought territory, while the 20 SMA accelerated higher, maintaining its upward slope after crossing above the 100 SMA, both far below the current level. The pair has also broken above the 200 SMA, above all of its moving averages for the first time since mid-September. A strong resistance area comes now between 1.1820 and 1.1830, where selling have proved strong multiple times in the past. Beyond it, and despite overbought conditions, the rally will likely continue toward the 1.1900 figure.  

Support levels: 1.1745 1.1700 1.1660

Resistance levels:  1.1820 1.1855 1.1890

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