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  • EUR/USD Forex Technical Analysis – Reverse Down After Some Missed Consumer Inflation

EUR/USD Forex Technical Analysis – Reverse Down After Some Missed Consumer Inflation

By on October 19, 2022 0

The euro is trading lower on Wednesday after annual endline consumer inflation came in slightly below expectations at 9.9%. Traders were looking for a reading of 10.0%. Ending Core CPI was unchanged at 4.8%. Despite the drop in the CPI, economists are still predicting that the European Central Bank (ECB) will raise its benchmark interest rate next week.

The ECB meets on Thursday, October 27 and is expected to raise its key rates by 75 basis points. This would match its rise in September, after starting its tightening trajectory with a 50 basis point rise in July.

At 11:43 GMT, EUR/USD is trading at 0.9770, down 0.0090 or -0.91%. On Tuesday, the Invesco CurrencyShares Euro Trust (FXE) ETF settled at $90.96, up $0.23 or +0.25%.

The euro is also coming under pressure from a stronger US dollar, which is benefiting from rising government debt yields. Treasury yields rose across the board on Wednesday as worries about a recession spread among investors.

Concerns about a recession are growing among investors as the Federal Reserve continues to follow a hawkish trajectory lined with interest rate hikes. Speaking at an event on Tuesday, Minneapolis Fed Chairman Neel Kashkari said he saw no reason not to push the central bank‘s benchmark funds rate above 4, 75% to fight inflation.

EUR/USD daily

Daily Swing Chart Technical Forecast

The main trend is down according to the daily swing chart. A trade through .9999 will change the main trend to the upside. A move through .9632 will signal a resumption of the downtrend.

The short-term range is 0.9537 to 0.9999. EUR/USD is currently testing its retracement zone between .9768 and .9714.

On the upside, a 50% resistance level at 0.9968 halted the recent four-day rally at 0.9876 on Tuesday.

Daily Swing Chart Technical Forecast

Traders’ reaction to the short-term 50% level at 0.9768 should determine EUR/USD’s direction on Wednesday.

Downside scenario

A sustained move below .9768 will indicate the presence of sellers. If this move gains traction, expect further selling to the short-term Fibonacci level at 0.9714. If this level fails, expect selling to eventually extend to the next major low at 0.9632.

Bullish scenario

A sustained move above .9768 will signal the presence of buyers. This could trigger an intraday short cover rally towards .9818. Sellers are likely to intervene on the first test of this level, but if it fails, we could see a retest of the resistance cluster at 0.9868 to 0.9876.

Secondary notes

Also today, EUR/USD traders will be looking to better understand the state of the US economy and the impact of economic developments on consumers.

Today’s Fed speakers and housing starts and building permits data might give them the information they seek.