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EUR/USD Forecast: Bears trying to regain control ahead of US CPI

Written By Walid Salah El Din | 2018-07-12 01:09:05 GMT

Amid escalating trade war fears, the greenback marched higher across the board and was further supported by hotter-than-expected US PPI print, coming in to show that the wholesale cost of goods and services rose at the fastest yearly rate in almost seven years. Wednesday's economic data reflected rising inflationary pressure in the US economy and reaffirmed prospects for gradual Fed monetary policy tightening cycle through 2018.

The pair now seems to have entered a consolidation phase and was seen oscillating within a narrow trading range below the 1.1700 handle as market participants now look forward to consumer inflation figures for some fresh impetus. The final German CPI print might produce some trading opportunities during the European session but the key focus would be on the headline US CPI print, expected to show a 2.9% y/y rise in June. 

Meanwhile, the price action since the beginning of this week clearly now seems to suggest that the recent corrective bounce might have already ended. Hence, any positive surprise from the latest US CPI figures might be enough to drag the pair back towards challenging the key 1.1500 psychological mark. The 1.1625-20 region, followed by the 1.1600 handle and mid-1.1500s could extend some intermediate support en-route YTD lows set on June 21.

Alternatively, a softer US inflation figures could provide a minor boost and lift the pair back above the 1.1700 handle ahead of the 1.1720 region, marking a short-term ascending trend-channel support break-point turned resistance. Any subsequent up-move now seems more likely to remain capped near the 1.1750 supply zone.

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By Walid Salah El Din
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