EUR/USD Forex Technical Analysis – Outlook Remains Bearish Ahead of US CPI Data

The Euro is trading flat against the U.S. Dollar early Monday on well-below average volume due to a U.S. bank holiday.

Although today’s price action is likely to be subdued, the single-currency could resume its downtrend after Friday’s strong U.S. labor market report reinforced bets on aggressive Fed rate hikes as investors braced for data later this week expected to show stubbornly high inflation.

At 02:47 GMT, the EUR/USD is trading .9742, up 0.0001 or +0.01%. On Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $89.90, down $0.53 or -0.59%.

U.S. Treasury yields are trading firm early Monday in limited action, making the U.S. Dollar a more attractive asset. The catalyst providing the support is Friday’s jobs report that showed U.S. unemployment unexpectedly fell last month. This news caused the odds of a super-sized 75-basis point rate hike at the Fed’s November 1-2 policy meeting to jump.

Meanwhile, U.S. inflation data due on Thursday is forecast to show headline inflation at a hot 8.1% year-on-year. Policymakers’ preferred core inflation is seen rising to 6.5%.

Friday’s jobs report indicated the U.S. economy is not cratering from the weight of a series of aggressive rate hikes by the Fed. However, rising energy prices and high inflation have put the Euro Zone economy on the brink of recession. Furthermore, the European Central Bank (ECB) is only expected to raise rates by 50 basis points.

The combination of all these events likely means lower EUR/USD prices over the near-term.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher.

A trade through .9999 will change the main trend to up. A move through .9537 will signal a resumption of the downtrend.

The minor range is .9537 to .9999. The EUR/USD is currently testing its retracement zone at .9768 to .9714.

The short-term range is 1.0198 to .9537. Its 50% level at .9868 is a potential upside target.

Daily Swing Chart Technical Forecast

Trader reaction to the minor Fibonacci level at .9714 is likely to determine the direction of the EUR/USD on Monday.

Bullish Scenario

A sustained move over .9714 will indicate the presence of buyers. The first upside target is the minor 50% level at .9768. Overtaking this level will indicate the buying is getting stronger. If this creates enough upside momentum then look for a near-term rally into the short-term 50% level at .9868.

Bearish Scenario

A sustained move under .9714 will signal the presence of sellers. This could trigger an acceleration to the downside with the next major target the September 28 main bottom at .9537.