EUR/USD, Euro Talking Points:

• The week started fast for EUR/USD bears but the Tuesday CPI report and then the Thursday PPI and retail sales report brought strength in the recent bearish move.
• There remains bearish structure as taken from the continued hold of lower-lows and highs on the daily chart, but the four hour chart is showing a hold of higher-lows and that keeps the door open for more pullback potential in EUR/USD.
• I look at EUR/USD and the U.S. Dollar in-depth during the weekly webinar, and you’re welcome to join the next installment. Click here to register.

EUR/USD weakness seemed to climax on Monday as the pair dropped quickly for a test of the 1.1100 handle. As I had said then, this week was going to be heavily driven by U.S. data as we had the CPI report the following morning, with PPI and retail sales to go along with a speech from FOMC Chair Jerome Powell on Thursday. And so far, that’s had a bearish tint for the USD and in-turn a bullish push for EUR/USD.

The CPI report came in at 2.3% for YoY headline inflation and that’s the lowest level in more than four years. This gave bears reason to pullback on the throttle from the sell-off in EUR/USD, and that pullback ran through yesterday morning, until resistance began to show at the 1.1275 zone.

Sellers pounced on that move and pushed the daily close below 1.1200, but then the Thursday data also took on a bearish USD tone as PPI on a MoM basis showed contraction, and retail sales excluding autos disappointed at 0.1% v/s 0.3% expected. The net from the Thursday morning outlay, so far, has been more USD weakness and EUR/USD is back to the 1.1200 handle for another resistance test.

From the daily, bearish control can still be argued especially after the Wednesday reaction to resistance at the 1.1275 zone. But, shorter-term, bears are losing momentum which I’ll look at a little later.

EUR/USD Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD Big Picture

The weekly chart of EUR/USD shows the pair working on a fourth consecutive week of gains. But, there’s still a day left until that bar completes and the underside wick illustrates a brisk reaction after the failed test below 1.1100. The weekly high is right at that 1.1275 level – and if bulls can force a push through there by the close on Friday, that’ll start looking more attractive for bullish reversal scenarios.

So, at this point I would still qualify the trend as bearish but that can shift depending on how hard buyers push into the end of the week.

EUR/USD Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

EUR/USD Shorter-Term

The four-hour chart illustrates well the waning momentum that sellers have been showing. Bears had an open door to press down to the lows after yesterday’s reaction at the 1.1275 zone but so far, they’ve failed to retain control. Instead, there’s been a build of higher-lows since mid-day yesterday and buyers are starting to gain acceptance above the 1.1200 level, albeit at an early stage.

At this point seller can still take control but they’re going to need to defend that swing-high from yesterday morning. A break above that especially if it holds into the weekly close, and there’s greater attraction for bullish reversals as looked at above from the weekly chart.

On a shorter-term basis, to illustrate bearish momentum on its way back, I would want to see sellers take out the 1.1165 swing low to re-open the door to a re-test of the 1.1100 level; and in that scenario, deeper support targets can come into play at 1.1045, 1.1000 and perhaps even the 1.0943 Fibonacci level.

EUR/USD Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

— written by James Stanley, Senior Strategist