EUR/USD Forex Technical Analysis – 1.0363 to 1.0460 on Radar after Drop in US Rate Hike Expectations

The Euro is trading at its highest level since July 5 on Wednesday after U.S. consumer inflation came in softer than expected. The news drove down Treasury yields, weakening the U.S. Dollar and driving up demand for riskier assets. Financial futures market traders also lowered the chances of a 75 basis point rate hike in September from 70% to 38%. The chances of a 50 basis point rate hike jumped to 62%.

At 13:11 GMT, the EUR/USD is trading 1.0329, up 0.0116 or +1.13%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $94.29, up $0.13 or +0.14%. It is expected to open higher.

Prices that consumers pay for a variety of goods and services rose 8.5% in July from a year ago, a slowing pace from the previous month due largely to a drop in gasoline prices.

On a monthly basis, price were flat as energy prices broadly declined 4.6% and gasoline fell 7.7%. That offset a 1.1% monthly gain in food prices and a 0.5% increase in shelter costs, the government reported.

Ahead of the report, traders were looking for headline CPI to increase 8.7% on an annual basis and 0.2% monthly.

Excluding volatile food and energy prices, so-called core CPI rose 5.9% annually and 0.3% monthly, compared to respective estimates of 6.1% and 0.5%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. Today’s trade through 1.0294 reaffirmed the uptrend. A move through 1.0123 will change the main trend to down.

The intermediate range is 1.0774 to .9952. Its retracement zone at 1.0363 to 1.0460 is the next upside target.

On the downside, support is a 50% level at 1.0284 and a retracement zone at 1.0149 to 1.0103.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at 1.0284 is likely to determine the direction of the EUR/USD into the close on Wednesday.

Bullish Scenario

A sustained move over 1.0284 will indicate the presence of buyers. The first upside target is a 50% level at 1.0363. Look for sellers on the first test of this level. Overcoming it, however, could trigger a surge into the Fibonacci level at 1.0460.

Bearish Scenario

A sustained move under 1.0284 will be a sign of weakness. This could trigger a pullback into a minor pivot at 1.0234.