Key Highlights
- The Euro traded towards 1.1570 and later corrected lower against the US Dollar.
- There was a break below a major bullish trend line with support at 1.1510 on the 4-hours chart of EUR/USD.
- The US CPI in Dec 2018 declined 0.1% (MoM), similar to the market forecast.
- The Euro Area Industrial Production for Nov 2018 will be released today, which could decline 1% (MoM).
EURUSD Technical Analysis
This past week, there was a steady recovery in the Euro above the 1.1500 resistance against the US Dollar. The EUR/USD pair even broke the 1.1550 resistance and later started a major downside correction.
Looking at the 4-hours chart, the pair traded as high as 1.1596 before starting a downside correction. The pair declined below the 1.1550, 1.1520 and 1.1500 support levels. There was a break below the 50% Fib retracement level of the last wave from the 1.1421 low to 1.1569 high.
Besides, there was a break below a major bullish trend line with support at 1.1510 on the same chart. The pair is currently trading in a bearish zone and it seems like it could test the 1.1420 and 1.1410 support levels, which are near the 100 simple moving average (red, 4-hours).
If there is a break below the 1.1410 support, the pair may extend declines towards the 1.1385 level and the 1.236 Fib extension level of the last wave from the 1.1421 low to 1.1569 high.
On the flip side, if there is a fresh upward move, the pair could face sellers near the 1.1485 level. A break above the 1.1485 and 1.1500 resistances may perhaps spark a move towards 1.1550 and 1.1575.
Fundamentally, the US Consumer Price Index report for Dec 2018 was released by the US Bureau of Labor Statistics. The market was looking for a 0.1% decline in the CPI in Dec 2018 compared with the previous month.
The actual result was similar as there was a 0.1% decline in the CPI. The yearly change posted a 1.9% increase in Dec 2018, which was less than the last 2.2%. The report added that:
The seasonally adjusted decline in the all items index was caused by a sharp decrease in the gasoline index, which fell 7.5 percent in December. This decline more than offset increases in several indexes including shelter, food, and other energy components. The energy index fell 3.5 percent, as the gasoline and fuel oil indexes fell, but the indexes for natural gas and for electricity increased. The food index increased 0.4 percent in December.
Overall, the US Dollar could gain a few points in the short term, but pairs like EUR/USD and GBP/USD are likely to recover further.
Economic Releases to Watch Today
- Euro Zone Industrial Production for Nov 2018 (MoM) – Forecast -1.0%, versus +0.2% previous.
- Euro Zone Industrial Production for Nov 2018 (YoY) – Forecast -1.4%, versus +1.2% previous.
