EUR/USD Forex Technical Analysis – Euro Mixed Ahead of US Inflation Data

The Euro is putting in a mixed performance against the U.S. Dollar on Tuesday shortly before the release of the key U.S. consumer price inflation report and the start of the U.S. Federal Reserve’s two-day meeting.

Consumer inflation likely cooled in November, but prices continued to rise at a still high rate, particularly for services. Meanwhile, traders have priced in a Federal Reserve likely to slow the pace of its rate increases at the conclusion of its two-day policy meeting on Wednesday.

At 12:06 GMT, the EUR/USD is trading 1.0535, down 0.0003 or -0.03%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $97.19, up $0.04 or +0.04%.

After the CPI data is released and the Fed makes its interest rate decision, the EUR/USD will move to the forefront with the European Central Bank (ECB) expected to make its interest rate decision on Thursday.

The common currency has gained almost 8% so far in the fourth quarter, as investors have previously banked on the ECB to a course of aggressive rate hikes.

We’re expecting heightened volatility after the release of the CPI data at 13:30 GMT. A hotter-than-expected reading should pressure the EUR/USD. Another cooler reading should launch an upside breakout. Gains or losses will be limited, however, due to the looming Fed decision.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0595 will reaffirm the uptrend. A move through 1.0443 will change the main trend to down.

The nearest resistance is a Fibonacci level at 1.0560, followed by the June 27 main top at 1.0615. The closest support is a minor pivot at 1.0442, followed by a 50% level at 1.0366.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0560 is likely to set the tone on Tuesday.

Bullish Scenario

A sustained move over 1.0560 will indicate the presence of buyers. The first two targets are main tops at 1.0595 and 1.0615. The latter is a potential trigger point for an acceleration to the upside with the June 9 main top at 1.0774 the next likely upside target.

Bearish Scenario

A sustained move under 1.0560 will signal the presence of sellers. This could trigger a break into the support cluster at 1.0443 – 1.0442. The latter is a potential trigger point for an acceleration into 1.0366.