EURUSD drops amid lower yields and growth concerns; CBs respond to inflation pressures

The EURUSD cracked lower today with selling pressure starting in the Asian session and continuing in the Europe morning session. PMI flash data for June was mostly weaker than expected. Yields are lower as well weakening the currency. Concerns about growth are driving as central banks are forced to continue to address inflationary pressures. The BOE hiked rates by 50 bps yesterday (exp. 25 bp hike) in reaction to higher-than-expected inflation (8.7% CPI). The EU CPI is also elevated at 6.1% while the headline US CPI is at 4.0% (core is higher).

Looking at the 4-hour chart, the pair fell back outside Red Box confined the pair back in April and May, and was reentered trading last week. The low of that Red Box came in at 1.08955. On Tuesday, the price dipped briefly below that level but quickly rebounded and traded to a new high yesterday going back to May at 1.1011. That took the price briefly above the May 11 high of 1.1006, but like the Tuesday low, the price quickly reversed (this time lower). Today’s move back below the low of the Red Box has traders’ bias shifting a little more to the downside.

The low price today did stall against the swing area near 1.0842 and 1.0848. The subsequent bounce has the pair now retesting the low of the Red Box. Sellers should lean against that area. It would take a move back above 1.0908 to shift the bias back higher.

On the downside, a break of 1.08424 would target a cluster of support defined by the 200 and 100-bar moving average on the 4-hour chart, the 100-day moving average, and the 50% midpoint of the move up from the May 31 low. Those levels all come in between 1.0809 and 1.08229.

For the week, the EURUSD is now lower. The EURUSD closed at 1.09398 last Friday. Today’s move lower has taken the price back below that level shifting the bias lower.

For more details on the technicals, watch the video analysis below.

This article was written by Greg Michalowski at www.forexlive.com. Source