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James Hyerczyk

The Euro is trading nearly flat against the U.S. Dollar for sixth consecutive session as investors continue to monitor the plunge in global bond yields, especially the spread between the U.S. 2-year and 10-year Treasury yields that appear to be close to signaling a recession. Studies show that a recession hits on average about 22 months after the yields invert.

At 13:30 GMT, the EUR/USD is trading 1.1217, up 0.0003 or +0.02%.

In other news, U.S. consumer prices rose more quickly than expected in July as gasoline reversed a two-month decline and the cost for rent continued to climb. The consumer price index for all items was up 0.3% for the month. Traders were looking for a 0.2% increase. On an annualized basis, the core inflation rate increased 2.2%, while the headline number was up 1.8%.

The CPI data may have come in higher than expected, but it won’t likely deter a 25-basis point rate cut that the markets have be pricing in.


Daily Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been trending higher since the formation of the closing price reversal bottom at 1.1027 on August 1. A minor closing price reversal top at 1.1250 on August 6 is helping to slow down the momentum.

A trade through 1.1282 will change the main trend to up. A move through 1.1027 will signal a resumption of the downtrend.

The minor trend is also down. A trade through 1.1250 will change the minor trend to up. This will change momentum to up. A move through 1.1162 will indicate momentum is weakening again.

The main range is 1.1413 to 1.1027. Its retracement zone at 1.1220 to 1.1265 is acting like resistance. It stopped the rally last week at 1.1250.

Support is a long-term Fibonacci level at 1.1185.

The short-term range is 1.1027 to 1.1250. Its retracement zone at 1.1139 to 1.1112 is another potential support area.


Daily Technical Forecast

Based on the early price action and the current price at 1.1217, the direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the Fibonacci level at 1.1185.

Bullish Scenario

A sustained move over 1.1185 will indicate the presence of buyers. Overcoming Gann angles at 1.1187 and 1.1197 will indicate the buying is getting stronger. This could trigger a surge into a 50% level at 1.1220 and a downtrending Gann angle at 1.1238.

The Gann angle at 1.1238 is a potential trigger point for an acceleration into 1.1250 then the main Fibonacci level at 1.1265. This is the last potential resistance before the 1.1282 and 1.1286 main tops.

Bearish Scenario

A sustained move under 1.1185 will signal the presence of sellers. This will also put the EUR/USD on the weak side of two key Gann angles.

The first target is the minor bottom at 1.1162. If this fails then look for the selling to extend into the short-term retracement zone at 1.1139 to 1.1112.

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