EUR/USD dipped lower following stronger than expected US CPI data but failed to sustain losses and is seen trading virtually unchanged as of the European close. The pair broke below a rising trendline on Wednesday which signals the potential for a broader decline although bulls are attempting to hold the pair above horizontal resistance.
The Bureau of Labor Statistics reported CPI ahead of expectations across the board. August CPI rose 0.4% against an expected gain of 0.3% and following a rise of 0.1% in the prior month. Annually, CPI rose 1.9% while core CPI rose 1.7% and 0.2% on a month over month basis.
EUR/USD spiked lower from a pre release level of 1.1892 to a low of 1.1838, falling short of testing a horizontal level at 1.1824 that held it lower for a large part of August. The level also provided support on a retreat following an upside break towards the end of August.
A technical break that occurred yesterday hints of a broader retreat in EUR/USD as the pair broke below a rising trendline that originates from the July 5th low. A horizontal level at 1.1886 was important resistance in early August. Bulls are seen attempting to lift the pair back above it following an earlier decline. Near-term resistance is seen at 1.1922 which was prior resistance, followed by the broken trendline, currently around 1.1950.
Volatility is expected on Friday as the Census Bureau will report US retail sales data in early North American trading. Retail sales in July rose 0.6% to beat expectations after falling short in the prior five readings. Analysts are looking for a 0.1% gain in August.
The US dollar index (DXY) has made significant gains this week but is seen facing a hurdle around 92.60 which was prior support in early August. On a daily chart, the index is on pace to post a doji candle to signal some exhaustion. The loosely correlated USD/CHF hit resistance at 0.9691 today and has retreated to give back a bulk of the early day gain. The level has acted as both support and resistance on several attempts since May.