The EUR/USD pair fell to a fresh weekly low of 0.9630 following the release of the US Consumer Price Index. In addition, the core reading was higher than anticipated, reaching a multi-year high of 6.6%. Hell broke loose with the news, and the greenback soared after spending the first half of the day on the back foot as market players rushed to price in a potentially more aggressive US Federal Reserve.

The downside is that it would probably translate into a recession. Wall Street collapsed with the news,  while government bond yields soared. Markets are in panic mode, a situation that will likely extend after the US opening.

The EUR/USD pair is currently hovering around 0.9650, maintaining its near-term bearish stance. The 4-hour chart shows that it broke below a mildly bearish 20 SMA, also below the 23.6% Fibonacci retracement of its latest daily rally at 0.9690. The Momentum indicator barely retreats from its midline, while the RSI indicator is stable at around 39, suggesting sellers are not yet strong enough. However, a bearish extension seems likely, given the broad greenback strength.

So far, the pair is down 0.43% at 0.9659 and a drop below 0.9631 (monthly low October 13) would target 0.9535 (2022 low September 28) en route to 0.9411 (weekly low June 17 2002). On the flip side, the next up barrier emerges at 0.9999 (weekly high October 4) followed by 1.0050 (weekly high September 20) and finally 1.0197 (monthly high September 12).

Spot is seen faltering around this key resistance area amidst the prospects for further gains in the dollar in the next months.

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0584.

EURUSD Expected To Reverse From Deeper Retracement Zones

Oct 13 2022