EUR/USD extended higher on Monday but the rally appears to have stalled at a moving average confluence. The latest inflation data from the United States will be released later in the session which should trigger volatility and ultimately indicate if the pair is to reverse lower from here.
Last week, the US dollar dominated the major currencies, and as such, EUR/USD carries a bearish bias over the near-term. From a broader perspective, the single currency has been recovering higher against the greenback since posting a low in October.
The euro is generally performing well among the major currencies and is the second-best performer among the week thus far, falling only behind the Swiss franc. The British pound is the worst performer as it fell sharply after a poor GDP reading on Monday.
The consumer price index in the US is expected to have risen 0.2% in December, and any deviation from that figure will tend to accompany a sharp reaction in the markets. In addition to the CPI release, FOMC member Williams is scheduled to speak.
EUR/USD has been recovering higher for the past two sessions, however, last week’s rejection above 1.1200 stands to draw sellers. With important resistance in play, this could be an area where the pair resumes lower.
Resistance for EUR/USD comes in at roughly 1.1138 as the 20 and 200-day moving averages have converged towards each other to create a confluence. There is some potential for a spike above resistance depending on the outcome of the CPI release, but the daily close will tend to be important.
In the early day, EUR/USD has been consolidating in a tight range and this type of price action may continue up until the CPI data is released.
An upside break in the exchange rate puts the focus on 1.1170 resistance. While the pair remains below the moving average confluence, the next area of interest comes in at 1.1070 as a rising trendline comes into play. This trendline connects the October low with lows posted in November.
- The EUR/USD recovery has stalled with important resistance in play from the 20 and 200 DMA.
- CPI data will be released from the US later today and is expected to drive volatility to the markets.
This article was originally posted on FX Empire
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