The consumer price index in the United States was reported on Tuesday to rise by 0.2% in December which was in line with expectations.
A rally in the dollar index (DXY) on the back of the report was capped at recent highs and a range has formed since. EUR/USD is tracing out the same pattern, holding in a range between 1.1110 to 1.1145.
French CPI data revealed a rise of 0.4% in prices during December. The reporting agency attributed the rise to higher energy and food prices while there was a notable rebound in the prices of services and manufactured products.
Later in the day, the latest producer price index figures will be released from the US. As well, Fed member Harker is scheduled to speak.
EUR/USD has been trending lower since the start of the new year, however, a weaker US jobs report on Friday has triggered a recovery. With current range in place, a break above 1.1145 would confirm that this recovery remains intact while a break below 1.1110 might signal a bearish continuation.
EUR/USD declined on Tuesday to take out early week lows, likely triggering some stops in the process.
The price action that followed is signaling some underlying weakness in the upward dollar trend. Combined with an upward trend channel forming in the pair from a low posted late last week, the pair carries a slightly bullish near-term bias.
But at the same time, a fairly major resistance confluence is holding the pair lower in the week thus far. This stems from the 200 and 20-day moving averages which have converged close to the 1.1140 price point. This area created a major barrier on Monday and Tuesday and will continue to be an important technical area in the session ahead.
A bullish break above it could see the pair rally towards resistance at 1.1183. On the other hand, a bearish break below support at 1.1110 would target support at 1.1078.
- EUR/USD saw some initial selling pressure following Tuesday’s CPI report but has recovered the losses and fallen into a range.
- A breakout of the range between 1.1110 and 1.1145 will clarify the near-term direction.
This article was originally posted on FX Empire
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