EUR/USD Declines Towards Weekly Lows Following US CPI Data

EUR/USD briefly spiked up following today’s inflation data out of the United States, but promptly reversed lower with a 4-hour candle erasing gains since yesterday’s European open.

The US consumer price index rose 1.5% on an annual basis, in line with the consensus and up from the prior reading indicating a rise of 1.1%. On a monthly basis, CPI rose 0.3% in September as expected and up from a rise of 0.2% in the prior month. Excluding food and energy, CPI fell short of expectations with the September figure rising 0.1% and the annual figure rising 2.2%.

The US Dollar index (DXY) reached a low of 97.61 ahead of the North American open and turned higher ahead of the release. DXY was last seen at 97.88 to erase early day losses, remaining unchanged on the day.

EUR/USD rallied to a high of 1.1026 where a 61.8% Fibonacci retracement measured from Thursday’s highs to this week’s lows triggered a turn lower. Similar to DXY, the pair initially turned higher after the release but reversed ahead of the top formed in European trading.

Today’s CPI data was the highlight of the week in terms of American data, notable events for the remainder of the week include central bank meetings for Canada on Wednesday, and Europe on Thursday.

Support in EUR/USD is seen at 1.0970 as the level has held the pair higher following the EU referendum. At the open this week, EUR/USD briefly scaled below the level but losses were not sustained. Further support is seen at 1.0911 reflecting the spike low set during the UK vote. Near-term resistance is seen at the pre-release level of 1.1004, the level had also provided some resistance during yesterday’s North American session. With a bearish 4-hour print, rallies are likely to be short-lived today, and while support at 1.0970 can trigger a bounce, the momentum in the decline seen over the past week suggests a break lower carries a higher probability.

EUR/USD 1-Hour Chart

EURUSD 1h Oct 15

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.