EUR/USD analysis: dollar corrects lower, but bearish trend intact

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0587

Following a quiet Asian session, the USD appreciated after London's opening, further accelerating its advance ahead of Wall Street opening, amid strong US data supportive of a March rate hike. The EUR/USD pair bottomed for the day at 1.0521, its lowest level since January 11th, but the greenback changed course during the US afternoon, suddenly entering negative territory daily basis against all of its major rivals. Dollar's reversal came in spite of another strong tax headline from US President Trump, who said that a massive tax plan will see the light in the "not-too-distant future," when speaking with retail executives. The pair set a daily high of 1.0608, but settled a few pips below 1.0590.

In the US, January Retail Sales rose by 0.4% when compared to the previous month, while the core reading, ex-autos, advanced 0.8%. Inflation in the same month surged by the most in four years, up by 0.6%, doubling expectations of 0.3%. The annual inflation rate printed 2.5%, above the 2.4% expected and previous 2.1%. Additionally, the New York Empire State Manufacturing index for February surged to 18.7, a strong bounce from previous 6.5, and the highest reading in over two years.

The late recovery was not enough to revert the negative tone of the pair, as in the 4 hours chart, the recovery stalled right around a still bearish 20 SMA. Furthermore and in the same chart, technical indicators have posted moderate bounces from their mid-lines, but remain well into negative territory. The pair has briefly broke below the 1.0565 Fibonacci support before recovering above it, but renewed selling interest below the level will likely result in fresh weekly lows, particularly if hopes about the upcoming US tax reform keep fueling sentiment. Additional gains beyond 1.0625, the immediate resistance, could result in a recovery up to the 1.0660 region, en route to the critical 1.0705 price zone.

Support levels: 1.0565 1.0520 1.0470

Resistance levels: 1.0625 1.0660 1.0705

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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