EUR/USD Forex Technical Analysis – Flattening Ahead of US Consumer Inflation Data

The Euro is flat early Wednesday following a choppy trade the previous session as traders await a key reading on inflation that could provide clues on the Federal Reserve’s monetary policy path.

At 02:00 GMT, the EUR/USD is trading 1.0533, up 0.0003 or +0.02%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $97.54, down $0.27 or -0.28%.

Investors will closely eye the April consumer price index (CPI) reading on Wednesday, due to be released at 12:30 GMT, for any signs inflation may be starting to cool, with expectations calling for an 8.1% annual increase compared to the 8.5% rise recorded in March.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.0642 will change the main trend to up. A move through 1.0472 will signal a resumption of the downtrend.

The minor range is 1.0472 to 1.0642. The market is currently trading on the weak side of its pivot at 1.0557, making it resistance.

The short-term range is 1.0936 to 1.0472. If the main trend changes to up then look for a move into its retracement zone at 1.0704 to 1.0759.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Wednesday is likely to be determined by trader reaction to 1.0557.

Bearish Scenario

A sustained move under 1.0557 will indicate the presence of sellers. The first downside target is the low at 1.0483, followed by the main bottom at 1.0472.

Taking out 1.0472 will not only reaffirm the downtrend, but it could also trigger an acceleration into the January 3, 2017 main bottom at 1.0339.

Bullish Scenario

A sustained move over 1.0557 will signal the presence of buyers. If this move creates enough upside momentum then look for a possible surge into the main top at 1.0642.

Taking out 1.0642 will change the main trend to up and could trigger an acceleration into the retracement zone at 1.0704 to 1.0759.

Side Notes

Bullish traders are looking for a lower-than-expected CPI number. Theoretically, this could encourage the Fed to ease up on its plan to raise interest rates aggressively by 50 basis points in June and July. This could soften demand for the U.S. Dollar, boosting the Euro.

A higher CPI reading could sink the EUR/USD further toward a more than five-year low.