EUR / USD Outlook: Bulls Press Key Fibo Barrier Ahead of US Inflation Data
The euro traded at the upper end of the short-term European trading range on Wednesday, after finally entering a thick, declining daily Ichimoku cloud on Tuesday.
The stock is still holding below the pivot Fibo barrier at 1.3795 (38.2% at 1.1692 / 1.1186 bear-leg) which has been leveling off since mid-November.
A breakout here is needed to signal the end of the extended sideways trade and an open path for a stronger correction to the wider bearish trend from 1.2266 (May 25, 2021 peak).
Daily studies are mixed as MAs (10/20/30/55) are in a bullish configuration but the positive momentum is waning which may hamper new bulls but the short term bias is expected to remain positive while that the stock remains above the daily cloud base (1.1347) has now returned to support.
Traders await the release of US inflation data, which should provide a stronger directional signal.
Economists expect US inflation to hit its highest level in 49 years at 7.00% in December, which would add to the Fed’s decision to start tightening monetary policy as early as March. policymakers seeing three hikes this year, while many expect four rate hikes on the spike in inflation.
The single currency could come under pressure on such a scenario, as traders would increase their long positions on the dollar due to aggressive actin expectations from the US central bank.
However, many analysts caution against the “buy the rumor – sell the fact” scenario, as high dollar levels provide a good selling opportunity.
Additionally, similar action could be expected if the US CPI falls below expectations, which would deflate expectations of accelerating Fed tightening this year.
Res: 1.1379; 1.1400; 1.1439; 1.1463.
Sup: 1.1354; 1.1330; 1.1305; 1.1272.