EUR/USD Pushes Back To Parity But Can Euro Bears Overtake It?

EUR/USD Talking Points:

• EUR/USD started the week with a jump in its move and it was later accelerated Tomorrow’s CPI Print Out from USA,
• As I’m discussing, The parity level is a big deal on the EUR/USD And so far it has helped the bears survive a deep break for about two months. But – it is not a brick wall and can be pulled out with enough force. The last time the level was trending was in 2002, it took six months to break through.
• Next week is heavily risky so the potential for inspiration certainly exists – tomorrow brings euro-area inflation along with retail sales and Friday consumer sentiment. And then there’s the Fed next week.
• Depends on the analysis contained in the article price action And chart creation, To learn more about price action or chart patterns, see our DailyFX Education section.

EUR/USD parity is back on handle And now we are at the two month mark, as the preliminary exam below the big figure was on 14th July.

interesting – That move was also driven by a CPI print, In July, the CPI for June was released to the tune of 9.1%, surprising the market to its highest level in 40 years. The knee-jerk reaction was one of USD-strength and the EUR/USD hit that first parity break in more than 19 years.

But, as I’ve been discussing, it will often take some time to get past a level like equality, and the reason lies in the foundations of human psychology, hence the term. ‘Psychological level.’ The .9999 price ‘feels’ much cheaper than just two pips below 1.0001. And that relationship is wide, so the .9900’s price looks a lot cheaper than the 1.0100’s print. And this is why most retailers end prices in increments of .99 – it feels cheap, and thus inspires action. If something is cheap, there is a general tendency to buy, while if something looks expensive, there is a general tendency to sell.

And price fluctuations, in general, take time to accept. This is something that many areas are dealing with at the moment, going to the store and looking for a product that is 8, 9 or 10% more expensive. It can change your purchasing decisions, right? Unless capital is infinite, these changes in prices matter, and this forces various purchasing decisions that can have a major impact on market pricing.

And in the markets, as we’ve seen, this psychology goes, with EUR/USD having a hard time attracting many new sellers when the price is below par, when the pair feels or looks cheap on a relative basis. Is.

That’s why it was created falling nail formation Similarities have come into play in the past two months. Sellers have been more cautious about resistance or support, forming a weak angle on the support trend of the formation. Meanwhile, sellers remained very aggressive around resistance or after a bounce, and this led to a more aggressive angle on the resistance trend line.

And this is why falling wedges are often tracked for reversals – hoping the same lack of motivation from sellers in support will – eventually – lead to a bullish reversal.

EUR/USD Daily Price Chart

chart prepared by James Stanley, EURUSD on tradingview

EUR/USD Falling Wedge Reversal Falls Flat

The falling wedge reversal in EUR/USD began a week ago, just before the ECB rate decision, where the bank was expected to announce its biggest rate hike of 75 basis points ever.

EUR/USD poked above parity, temporarily, only to snap around back-down right european central bank rate decision, It was a dangerous subject – the markets rebuked the ECB’s attempt to base something on inflation.

But, as I warned later – support was starting to show around the former resistance. – As derived from the falling wedge formation.

Tea The cap’s support from Thursday came in the form of a high-low, which soon turned higher-low on Friday, It extended through this week’s open, yet another high-high as the price moved too close to the 1.0200 handle.

And then yesterday’s CPI report dashed all that as the price immediately came back to the parity handle.

EUR/USD Hourly Chart

chart prepared by James Stanley, EURUSD on Tradingview

EUR/USD – Door open for a break as we look at the economic calendar

Perhaps the most obvious thing from yesterday’s CPI print was the panic that followed immediately. It is not foreign to the markets, especially not of late, but it highlights the continued softening of the ‘buy the dip’ theme that is too stubborn around equities. This has something to do with the FX markets, as well, an expected Fed pivot or pause could also be related to the USD-pullback, somewhat similar to what was seen ahead of yesterday’s inflation report.

But, what is more important than the past is what lies ahead – and that is a repository. economic calendar With a lot of drive from some major events. Tomorrow brings retail sales data from the US, and Euro inflation and consumer sentiment follows on Friday. Next week brings the FOMC rate decision and the markets are actually anticipating the possibility of a 100 bp hike after yesterday’s CPI print.

On top of all that – the Fed has a quarterly meeting next Wednesday, which means updated estimates. The bank may send a lot of messages with dot plot forecast next week and if we see a move of 75 bp then I am guessing it to be the main driver.

However, chances remain around EUR/USD. And given the continued persistence of sellers, the pair may have an open path for a bearish breakout, although this will probably require some continuation of the panic seen yesterday and for this perhaps some help from the headlines on the next pair days will be required.

A breach of support in the .9862-.9876 zone leads to a new 20-year low in the pair, and .9950 and .9900 remain waypoints on the way to that key support. On the resistance side of the coin, matters are a bit more muddled given the recent grind around parity. I am tracking initial resistance from 1.0034-1.0044, after which an area of ​​resistance from support comes into the picture around 1.0100. Besides, resistance lies near 1.0200 and then near 1.0275. If buyers can test there, 1.0350 comes into picture and it was a major point of contention in early August.

EUR/USD Four Hour Price Chart

chart prepared by James Stanley, EURUSD on Tradingview

— Written by James Stanley, Senior Strategist, DailyFX.com and Head of DailyFX Education

Contact and follow James on Twitter: @JStanleyFX