EUR/USD Mid-Session Technical Analysis for July 14, 2017

The EUR/USD is trading slightly better shortly before the release of reports on U.S. Retail Sales and Consumer Inflation at 1230 GMT. The consumer inflation report is expected to be a market moving event.

The CPI for June is expected to come in at 0.1%, slightly above the -0.1% previous read. Core CPI is forecast at 0.2%, up slightly from 0.1%. A better-than-expected number should be bearish for the EUR/USD.

Core Retail Sales for June are expected to show a 0.2% increase, up from the May read at -0.3%. Retail Sales are expected to show a 0.1% gain, better than the previous -0.3. A better-than-expected number will underpin the U.S. Dollar, but shouldn’t have the same impact as the CPI report.

The CPI report has taken on added importance because of remarks earlier in the week from Fed Chair Janet Yellen. A pickup in U.S. inflation should reinforce views that the Fed would hike interest rates sooner rather than later. This news would lift Treasury yields, making the U.S. Dollar a more attractive investment.

Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the potentially bearish closing price reversal top at 1.1489 on July 12.

A trade through 1.1489 will negate the closing price reversal top and signal a resumption of the uptrend.

A trade through 1.1312 will change the main trend to down.

The short-term range is 1.1312 to 1.1489. Its retracement zone at 1.1401 to 1.1380 is controlling the short-term direction of the market.

The main range is 1.1118 to 1.1489. Its retracement zone at 1.1304 to 1.1260 is the primary downside target.

Forecast

Based on the current price at 1.1413 and the earlier price action, the direction of the EUR/USD is likely to be determined by trader reaction to the 50% level at 1.1401.

A sustained move over 1.1401 will indicate the presence of buyers. This could trigger an acceleration to the upside with the next target angles coming in at 1.1418 and 1.1452. Crossing to the strong side of the angle at 1.1452 will put the market in a bullish position with the top at 1.1489 the next upside target.

Taking out 1.1489 could trigger an acceleration to the upside. This could lead to an eventual test of the May 3, 2016 top at 1.1616.

A sustained move under 1.1401 will indicate the presence of sellers. This should lead to a quick break into the support cluster at 1.1382 to 1.1380.

The Fibonacci level at 1.1380 is the trigger point for an acceleration to the downside with potential targets coming in at 1.1312, 1.1304 and 1.1298.

Depending on the strength or weakness of the CPI report, we could see a move into 1.1489, or down to 1.1312. Watch for volatility.