EUR/USD extends the renewed uptick towards 1.1650, eyes on German CPI
- USD meets fresh supply.
- German and US inflation data on tap.
- Back above July-end lows near 1.1615.
Having witnessed a brief phase of consolidation around 1.1615 levels earlier on the day, the EUR/USD pair finally broke higher and now approaches the mid-point of 1.16 handle amid persistent broad-based USD weakness.
EUR/USD: Eyes on German CPI
The spot is seen extending its recovery from three-month lows of 1.1575, as narrowing 10-year US-German yield differential offer some respite to the EUR bulls, as Treasury yields remain weaker on the latest chatter of a less hawkish Jerome Powell likely to be the next Fed Chair.
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However, it remains to be seen if the German harmonized CPI figures lift the pair back above 1.1650 levels, as Germany’s regional CPI data released so far paint a bleak picture of the nationalized CPI report for the month of October.
- Bavaria Oct CPI m/m -0.1% vs +0.2% prev
- Saxony Oct CPI Saxony m/m 0.00% prev 0.20%
- Baden-Wurttemberg Oct CPI m/m at-0.20% prev +0.3%
- Hesse Oct CPI mm -0.2% vs +0.3% prev
Further, downbeat German retail sales release combined with the ECB’s dovish taper announcement made last week, will continue to keep the bears in play. Hence, markets could resort to ‘Sell the Pullback’ strategy in the day ahead, as attention now shifts towards the German CPI and US Core PCE index for near-term trading impetus.
EUR/USD Technical Levels
Karen Jones, Analyst at Commerzbank explained: “EUR/USD last week closed below 1.1662 the 17th August low and in doing so completed a head and shoulders top pattern 1.2092-1.1662, this measures to 1.1232 and given the close proximity of the 200 day ma at 1.1249 we will make this our downside target. The outlook remains negative while capped by the current October highs and early August high at 1.1858/1.1910, intraday rallies are indicated to terminate circa 1.1680/1.1750. Additional support is offered by the mid-June high at 1.1296 and the more important 1.1110 end of May low.”