EUR/USD Forex Technical Analysis – Traders Bracing for Hot US CPI Data with .9860 on Radar

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James Hyerczyk

Tue, Jul 12, 2022, 8:20 PM 2 min read

The Euro is trading nearly flat against the U.S. Dollar early Wednesday as traders position themselves ahead of the U.S. Consumer Price Index (CPI) report, due to be released at 12:30 GMT. Traders are expecting the results of the report to set the tone for the day since it will be used to set Fed policy at its July 26-27 meeting.

At 02:20 GMT, the EUR/USD is trading 1.0029, down 0.0008 or -0.08%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $92.76, down $0.11 or -0.12%.

US Consumer Inflation Sets the Tone

June’s headline consumer price index is expected to have been even hotter than May’s report, but consumer inflation may have finally peaked given the decline in oil and gasoline prices in July.

Headline CPI is expected to rise by 1.1%, compared with 1% in May, according to Dow Jones. On a year-over-year basis, CPI is seen rising by 8.8%, up from May’s 8.6%, the highest since 1981.

Core inflation, on the other hand, is expected to continue to cool, slowing now for a third month. Excluding energy and food, June’s core CPI was expected to rise 0.5%, compared with 0.6% in May. That would be 5.7% year-over-year jump in June, down from 6% in May. Core CPI peaked at 6.5% in March.

Short-Term Outlook

Trader reaction to 1.0037 is likely to determine the direction of the EUR/USD early Wednesday.

Bearish Scenario

A sustained move under 1.0037 will indicate the presence of sellers. The first downside target is yesterday’s low at 1.000. Although there was a technical bounce following the test of this level on Tuesday, it’s essentially just psychological support. Look for the sell-off to possibly extend into the December 2, 2002 main bottom at .9860 if parity is taken out with strong selling volume.

Bullish Scenario

A sustained move over 1.0037 will signal the presence of counter-trend buyers. Taking out 1.0074 will make 1.0000 a new minor bottom.

Side Notes

A trade through 1.000 then a higher close will form a potentially bullish closing price reversal bottom. If confirmed, this won’t change the main trend to up, but it could lead to the start of a 2 to 3 day counter-trend rally.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire