The German preliminary CPI data released today was weaker than anticipated, showing a -0.4% decline compared to the expected -0.1%. On a year-on-year basis, it stood at 3.2%, lower than the forecasted 3.5%. This outcome could positively influence the upcoming CPI data from the EU and has contributed to a softer EURUSD in today’s trading.
From a technical perspective, the currency pair experienced a notable movement yesterday. It broke above the key 61.8% Fibonacci retracement level of the downward move from the July high, which is at 1.09589. It also surpassed a significant swing area between 1.0944 and 1.0964. Following the CPI announcement, this area is now being retested. Earlier in the session, the pair peaked above a critical resistance area around 1.1010, reaching a high of 1.1016, but it subsequently reversed its gains.
Looking ahead, if the price falls below the 61.8% retracement level at 1.09589 and then breaches the lower end of the swing area at 1.0944, we might see a shift in market sentiment, with buyers turning into sellers. However, if this support zone holds (notably, there has been some resistance near the top of the swing area), a move back towards the key resistance levels at 1.1000 and 1.1010 could occur. Breaking these levels would be necessary to reinforce a bullish trend.
This article was written by Greg Michalowski at www.forexlive.com. Source