The EUR/USD dropped on Tuesday down to the 1.1430 mark. At that level it stopped, and the stop forced a review of the currency exchange rate's hourly chart.
It was discovered that there exists another version of an ascending channel pattern. The pattern's lower trend line was located at the 1.1430 level and provided the needed support for the rate to pause its decline.
The European Single Currency appreciated against the US Dollar, following the US CPI and Core CPI release on Friday at 13:30 GMT. The EUR/USD exchange currency rate gained 9 pips or 0.08% during a minute, right after the release. The European Single Currency continued trading at the 1.1455 area against the US Dollar.
Note that the US consumer prices dropped for the first time in nine months. The Bureau of Labor Statistics released US CPI data in line with expectations of negative 0.01%. Note, that the US Core CPI was released at the same time with the US CPI.
The U.S. Bureau of Labor Statistics reported on Friday, "The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in December on a seasonally adjusted basis after being unchanged in November,"
Inflation reports and Brexit
Fundamental data traders will mostly pay attention this week to the Brexit vote at the UK's Parliament. Meanwhile, macro release traders will still have events to watch and trade.On Tuesday, at 13:30 GMT the US Producers Price Index will be published. The release will be covered mainly due to Dukascopy Analytics sticking to the rule – If it causes 10 pips, we over it.
US PPI causes mostly just above ten pip moves. Enough to trigger a trailing stop loss, but not enough to actually change a strategy.
On the same day note that the ECB President Draghi will testify before the European Parliament in Strasbourg. Some of his comments might cause an increase of volatility in the EUR pairs.
On Wednesday, at 09:15 action will begin in the UK. Namely, at that time the Bank of England Governor Carney will report to the UK treasury about his actions. Most likely he will report how he dealt with Brexit volatility and lay out the bank's future scenario in regards to the results of the Parliament vote on Tuesday.
Simultaneously to the reporting of Carney, the UK CPI will be published. This data release usually causes moves of around 20 base points. However, this time Dukascopy Analytics expect all attention to be taken away by the Carney's report.
Besides a speech at the G20 Meetings by Bank of Japan's Governor Kuroda at 03:20 GMT, there is nothing on Thursday to watch.
On Friday, two data releases will be covered by Dukascopy Analytics.
At 09:30 GMT the UK Retail Sales will be published. Around 10-40 base point move can be expected during the event.
The biggest event of the will occur at 13:30. The Canadian CPI will be published. On the USD/CAD there are 30 pip moves even when it hits the forecast. When the data is different there have been 40-85 pip moves.
EUR/USD daily review
During Monday's trading session, the weekly PP was resisting the currency exchange rate to keep the rate at 1.1480. However, during Tuesday's midnight hours, the rate was resisted by the 55-hour simple moving average to the 1.1431 mark.In regards to the near-term future, most likely, the currency exchange rate will depreciate towards the monthly S1 at the 1.1330 mark.
On the other hand, the European Single Currency could appreciate against the US Dollar to 1.1450 during today's US PPI and Core PPI data releases at 13:30 GMT.
Hourly Chart
On the daily chart during the recent surge the pair reached the upper trend line of a large scale medium pattern, which we expected to guide the rate higher during the next couple of months.
Due to that reason the pair is expected to either retreat or trade sideways in the upcoming weeks. That way it can reach the upper trend line of a dominant pattern somewhere below the 1.1600 level.
Meanwhile, take into account that the 100-day SMA was providing resistance at 1.1410, and the 55-day simple moving average was set to provide support at the 1.1400 level.
Daily chart
On Monday, the sentiment was 70% short during the second part of the day's trading.
By the middle of Tuesday's trading the traders of the Swiss Foreign Exchange were short in 68% of cases.
Meanwhile, trader pending orders in the 100-pip range were set to buy in 57% of cases.
The traders were short even before the current decline began. Combining that information with the latest updates in the sentiment data a couple of conclusions can be made.
The short traders are recovering and/or decreasing their losses. Meanwhile, some have already closed their short positions, as they took profits from the decline.
In addition, it can be observed that the buy orders don't dominate. The traders, which have open the short positions, intend to keep them in most cases. The lack of buy orders close buy shows that the take profits and stop losses are farther away.