EUR/USD Forecast: Heading to a lower high or is this move for real?

The EUR/USD is trading around $1.2370, up some 0.15% on the day but off the highs of $1.2387. The market mood on Wednesday is somewhat less optimistic than on Tuesday. Hopes about a successful trade negotiation between the US and China have slightly moved aside and made way for other worries. 

The situation in Syria remains tense as the US and its allies plan a military response to the chemical by the Syrian regime over the weekend. In addition, an airstrike on an Iranian base in Syria is attributed to Israel. Tensions run high as many countries are involved in the Middle Eastern country.

Another source of worry comes from the Mueller Investigation. After the FBI raided the offices and home of Michael Cohen, Trump's personal attorney, the White House opened the door to the sacking of Robert Mueller, the Special Counsel investigating the Russian meddling in the US elections. The fears weighed on stocks late on Tuesday.

In the euro-zone, Italian Retail Sales came out with a rise of 0.4%, better than 0.2% that had been expected. However, the focus is on monetary policy. Ewald Nowotny, the Austrian member of the ECB, said that QE will end this year and also discussed a rise in the deposit rate. This sent the common currency higher. Later, the ECB disowned the comments and said they do not reflect the thinking at the central bank. The response to this message was relatively muted. 

Later today, ECB President Mario Draghi will speak in front of students. The Q&A session may be of interest, especially any words related to Nowotny's statements.

The focus then shifts to the US. Inflation data is expected to show that Core CPI significantly rose from 1.8% to 2.1% y/y. This reflects the removal of base effects related to wireless charges and may push the Fed towards four hikes in 2018.

More: What to expect from US inflation and EUR/USD

The Fed will have the last word of the day with the release of the FOMC Meeting Minutes. The document may shed more light on the tendency to accelerate the path of rate hikes and also the fear about trade wars. 

See: FOMC Meeting Minutes Preview: Hawkish on hikes but terrified on trade?

EUR/USD Technical Picture

The EUR/USD broke above the 50-day Simple Moving Average, a bullish sign. In addition, the RSI is picking up steam and not hugging the 50 level anymore.

However, Momentum is still nowhere to be found and the pair has yet to prove this rise is not just another lower high after setting a lower low at $1.2210.

Resistance awaits at $1.2412, a high seen on March 13th. Further above, $1.2480 was the swing high on March 27th. The pair faces further resistance at $1.2555, the three-year high.

Support is at $1.2340, where a swing high from late April meets the 50-day Simple Moving Average. Further down, $1.2240 served as support in March and $1.2210 worked as such in early April.

More: EUR/USD breaks higher, next significant resistance only at $1.2425 — Confluence Detector