EUR/USD Forex Technical Analysis – Euro Sinks after Hot US Inflation Report

The Euro is trading lower against the U.S. Dollar on Tuesday, following the release of a disappointing U.S. Consumer Price Index report. The data showed inflation rose 0.1% in August even with a sharp drop in gas prices. The price action suggests bullish Euro traders were hoping for a lower reading.

At 12:34 GMT, the EUR/USD is trading 1.0080, down 0.0042 or -0.41%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $93.39, up $0.65 or +0.70%.

Ahead of the CPI report, traders were pricing in a 90% chance of a 75 basis point rate hike by the Fed on September 21. At the same time, the odds of a 50 basis point rate hike on November 2 are at 76.2% and a 75 basis point hike at 13.7%.

After the report, traders were still pricing in a 90% chance of a 75 basis point rate hike next week. The chances of a 50 basis point rate hike on November 2 jumped to 82.4% and the chances of a 75 basis point rate hike fell to 8.6%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trade through 1.0198 signaled a resumption of the uptrend. A move through the next main top at 1.0368 will reaffirm the uptrend. A trade through .9864 will change the main trend to down.

On the downside, the nearest support is a short-term 50% level at 1.0116. On the upside, resistance is a 50% level at 1.0239, followed by an intermediate retracement zone at 1.0319 to 1.0426.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at 1.0116 is likely to determine the direction of the EUR/USD on Tuesday.

Bullish Scenario

A sustained move over 1.0116 will indicate the presence of buyers. If this generates enough upside momentum then look for a surge into 1.0239.

Sellers could come in on the first test of 1.0239, but if it’s taken out then look for an acceleration to the upside with 1.0319 the next target, followed by the main top at 1.0368 and a Fibonacci level at 1.0426.

Bearish Scenario

A sustained move under 1.0116 will signal the presence of sellers. This could trigger a break into the minor pivot at 1.0031.

Since the main trend is up, buyers could come in on the first test of 1.0031. If it fails then look for the selling to possibly lead to a retest of the support cluster at .9864 to .9860.