James Hyerczyk
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The Euro is trading higher against the U.S. Dollar early Friday as investors are seemingly shrugging off yesterday’s potentially bearish U.S. consumer inflation report, which may have dampened the chances of a 50-basis point rate cut by the Federal Reserve at the end of July. Investors are still 100% certain of a 25-basis point rate cut, but the surprise jump in consumer prices has cast doubts on the half-a-point rate cut.

At 04:08 GMT, the EUR/USD is trading 1.1271, up 0.0017 or +0.15%.

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On Thursday, Treasury yields jumped after the release of U.S. inflation data that beat economist expectations along with a bond auction that saw weak demand. The rise in yields made the dollar a more attractive asset.

Early Friday, yields are drifting lower, helping to support the EUR/USD. This relationship is likely to drive the price all session. At 12:30 GMT, traders will get the opportunity to react to U.S. Producer Inflation data.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. Momentum has been trending lower since the formation of a closing price reversal top at 1.1413 on June 25, but the current three day rally is attempting to shift momentum to the upside.

A trade through 1.1193 will change the main trend to down. This is followed closely by another main bottom at 1.1181. This is the trigger point for an acceleration into the next pair of main bottoms at 1.1116 and 1.1107.

Taking out 1.1286 will indicate the buying is getting stronger, but there is still retracement level resistance to overcome before we’ll see a breakout.

On the downside, potential retracement level support comes in at 1.1260, 1.1224 and 1.1185.

On the upside, retracement level resistance is lined up at 1.1278, 1.1303, 1.1318 and 1.1329. The latter is the trigger point for an acceleration to the upside.


Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 1.1271, the direction of the EUR/USD on Friday is likely to be determined by trader reaction to the 50% level at 1.1260.

Bullish Scenario

A sustained move over 1.1260 will indicate the presence of buyers. This could lead to a labored rally with potential resistance a 50% level at 1.1278, a high at 1.1286, another 50% level at 1.1303 and a pair of Fibonacci levels at 1.1318 and 1.1329.

Bearish Scenario

A sustained move under 1.1260 will signal the presence of sellers. This is a potential trigger point for a steep break with the next target a Fibonacci level at 1.1224.

In the absence of any bullish news events, look for a labored rally until the EUR/USD clears 1.1329.

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