Today all eyes will be on the U.S. inflation data scheduled for release at 12:30 UTC. Consumer price inflation is forecast to show an increase in April and investors wonder whether rising inflation will force the Federal Reserve to tighten its monetary policy sooner than current guidance suggests. Fed officials reiterated that it’s premature to discuss pulling back monetary support but with the taper discussion coming back at the Fed’s meeting next month when economic projections are due to be released, early positioning could help the U.S. dollar strengthening. A lower-than expected inflation reading however may lead to another rally in risk assets.
Let’s have a look at the technical picture in both USD crosses:
Time for a correction?
After the pair tested the upper trend channel border between 1.4150-1.4180, a correction wouldn’t come as a surprise. While we see chances in favor of the bears today it will be crucial for the pair to remain below 1.42 in order to test current support levels at 1.40 and 1.39. A breakout above 1.42 however could possibly lead to a test of the February high at 1.4243 and a further run for 1.43.
In shorter time frames we see a double-top-pattern which could predict upcoming bearish momentum in case of a break below 1.2120. A next lower target would be at 1.2050. For the euro to rise towards 1.2250 we will first need to see a break above 1.2185.
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