Technical Analysis

EUR/USD Bounces Above 0.9800 As Investors Assess CPI Data

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    The pair bounced sharply after hitting fresh weekly lows as investors assessed the U.S. consumer price index data.

    The pair retreated to a low of 0.9631 at the beginning of the American session after the came in stronger than expected, although the EUR/USD took a U-turn afterward to trade positively on the day.

    At the time of writing, the EUR/USD pair is trading at the 0.9800 zone, 1.03% above its opening price, having struck a daily peak of 0.9806.

    The U.S. consumer price index rose by 8.2% YoY in September, decelerating from its previous reading of 8.3% but coming in higher than the market’s consensus of 8.1%. reached a 40-year high of 6.6%, advancing from the August 6.3% reading and above the 6.5% rate expected.

    The greenback strengthened across the board immediately after the release of the U.S. CPI data. However, the tables turned as investors continued to anticipate, for now, a 75 bps rate hike by the Federal Reserve at November’s meeting despite inflation not receding. The WIRP tool shows market participants already fully priced in a 75 bps hike, and chances of a 100 bps increase are barely 6.2%.

    The EUR/USD pair’s short-term bias has turned neutral from a technical perspective, although the dominant trend remains bearish. On the daily chart, the RSI has turned higher but holds below its midline, while the MACD has crossed into positive territory.

    EUR/USD daily chart.

    On the upside, if the EUR/USD pair manages to establish itself above 0.9800 – where the 20-day SMA reinforces the psychological level – the next resistances are seen at 0.9900 and October 6 high at 0.9926 ahead of parity. On the downside, support levels could be faced at 0.9630 and 0.9600 ahead of the cycle low of 0.9535.

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