The EURUSD initially rallied after the softer-than-expected U.S. CPI report, as traders pared back expectations for near-term Federal Reserve tightening. Headline inflation came in weaker than forecast, while core inflation also undershot expectations, reinforcing the view that inflation pressures continue to ease. Although Fed officials – including Fed Chair Warsh – have cautioned that one favorable inflation report is not enough to change policy, the data was enough to send the U.S. dollar broadly lower in the immediate aftermath of the release, helping lift the EURUSD.
That rally carried the pair to 1.1462, where it tested a key technical hurdle—the 38.2% retracement of the decline from the May 29 high at 1.14618. The level proved to be almost perfect resistance. Sellers stepped in immediately, stalling the upside momentum and triggering a reversal lower. The inability to break above that Fibonacci level kept the broader corrective rally from gaining traction and signaled that sellers were still willing to defend an important resistance area.
The subsequent decline brought the pair back toward its key hourly moving averages. The 200-hour moving average, currently at 1.1423, was tested first, with the price then probing toward the 100-hour moving average at 1.1417. Buyers responded near those support levels, helping the pair rebound modestly to around 1.1431. That reaction keeps the shorter-term technical picture balanced for now, but only barely.
Going forward, those two moving averages will define the near-term bias. A sustained move below the 200-hour and 100-hour moving averages would tilt the advantage back toward the sellers, increasing the bearish bias and opening the door for a deeper retracement of today’s post-CPI rally. Such a break would signal that the market has rejected the softer inflation-inspired move higher and is ready to refocus on the broader downtrend from the recent highs.
On the topside, buyers still have work to do. They need to regain momentum and force a break above the 1.1462 Fibonacci resistance. Clearing that level would represent an important technical victory and shift the focus toward higher resistance targets. Until one side breaks either the resistance at 1.1462 or the support defined by the 100- and 200-hour moving averages between 1.1417 and 1.1423, the pair remains trapped in a well-defined technical battleground where both buyers and sellers still have a case.
This article was written by Greg Michalowski at investinglive.com.
