Advertisement
Advertisement

EUR/USD Set Up for Upside Breakout Over 1.1397

By:
James Hyerczyk
Published: Jan 12, 2022, 12:31 UTC

The early price action suggests impending volatility on Wednesday. While traders expect to see a hot CPI number, they may have always price it in.

EUR/USD

In this article:

The Euro is trading lower against the U.S. Dollar shortly before the release of the U.S. Consumer Inflation report at 13:30 on Wednesday. The single currency rose to its highest level since January 3 earlier in the session before turning lower.

Traders continued to respond to yesterday’s comments from U.S. Federal Reserve Chair Jerome Powell, who sounded less hawkish than expected in a Congressional testimony. Powell said the U.S. economy was ready for the start of tighter monetary policy put it may take several months to make a decision on running down the Fed’s $9 trillion balance sheet.

At 11:51 GMT, the EUR/USD is trading 1.1359, down 0.0011 or -0.09%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $105.65, up $0.35 or +0.33%.

Looking ahead to today’s report, the consumer price index is released by the Labor Department Wednesday and is expected to show headline inflation jumped by 7%, its fastest pace since 1982.

The Federal Reserve is already on a path to raise interest rates to battle rising prices. A hot number should justify the Fed’s policy shift.

Economists expect the consumer price index (CPI) rose 0.4% in December, and 7% on a year-over-year basis, according to Dow Jones. That compares to a 0.8% jump in November, or a 6.8% gain year-over-year, the highest since 1982.

Excluding food and energy, CPI is expected to have risen 0.5% or 5.4% year-over-year, when the Labor Department releases the data Wednesday at 13:30 GMT.

Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through 1.1386 will change the main trend to up. A move through 1.1272 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the momentum. A trade through the intraday high at 1.1378 will indicate the buying is getting stronger. A trade through 1.1285 will change the minor trend to down.

On the upside, the nearest resistance is the 50% level at 1.1397. This is a potential trigger point for an acceleration to the upside with the next target a 50% level at 1.1439.

On the downside, the minor support is 1.1329, followed by the major Fibonacci level at 1.1291.

Daily Swing Chart Technical Forecast

The early price action suggests impending volatility on Wednesday. While traders expect to see a hot CPI number, they may have always price it in. Traders are also certain the Fed will be tightening policy, but Powell’s testimony on Tuesday indicates the timetable of the first rate hike is still uncertain.

So essentially, the CPI number won’t be driving the price action, but rather how fast traders believe the Fed will begin its tightening process.

A trade through the intraday high at 1.1378 will be the first sign of strength. This could create the upside momentum stronger enough to take out the main top at 1.1386, followed by the 50% level at 1.1397.

The key level to watch is 1.1397. Taking out this level could trigger an acceleration to the upside.

If the CPI news fails to generate enough upside momentum to trigger an acceleration to the upside, then we could see a pullback into the 50% support at 1.1329.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement