EUR/USD analysis: dollar rally could only extend with upbeat CPI numbers

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1892

After hesitating during the first half of the day, the greenback came back with a vengeance alongside Wall Street's opening, on mounting rumors the US government is stepping on the gas over the long awaited tax reform. There was no official announcement on the matter, with all coming from President Trump twitter, in where he urged the Congress to act quickly on his tax reform plan. The EUR/USD pair that traded as high as 1.1994, ended up breaking below the 1.1900 figure, to settled not far above a daily low of 1.1879. The only piece of relevant data released this Wednesday was the US producer price index, which came in below market's expectations. Despite rebounding in August, the index for final demand advanced just by 0.2% monthly basis, and by 2.4% when compared to a year earlier. Market's attention is anyway on upcoming final August CPI readings, to be released this Thursday.

Failure to regain 1.2000 is certainly discouraging for bulls, and the pair could clearly fall further, although long term the decline continues to look corrective, specially as there's no real background for a dollar rally. A long term ascendant trend line coming from the 1.0600 region, comes today around 1.1795, becoming a critical support, as a break below it will indicate that a steeper correction is under way. In the meantime, and for the short term, the pair is biased lower as in the 4 hours chart, and after failing to surpass its 20 SMA, the pair broke below the 100 SMA, whilst technical indicators maintain their strong downward slopes within negative territory. Last week low at 1.1822 is now the immediate support, en route to the mentioned trend line around 1.1795.

Support levels: 1.1870 1.1825 1.1795

Resistance levels: 1.1930 1.1965 1.2000

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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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