EUR/USD smashed higher this morning after Eurostat’s Flash CPI estimate pegged the Euro Area’s annualized inflation rate for a third consecutive reading at 0.8%. Though less than half the European Central Bank’s (ECB) target rate of 2%, today’s print was higher than forecast and by various accounts perceived as softening recently elevated expectations the ECB would initiate a QE program of its own later in the year.
Within one minute of the release EUR/USD added 50 pips, moving from 1.3725 to 1.3776 to break out of the right angle descending broadening formation (RADBF) pattern it has muddled through during later February. Â Now above local horizontal resistance near 1.3760, the pair has near-term upside targets at 1.3850 (an ABCD completion) and 1.3890 (RADBF pattern target) as laid out below:
EUR/USD – Hourly: Broadening Formation Breakout
In a broader context this move brings the pair – colloquially referred to as “Fiber” – back to the 1.38-1.39 resistance window it has visited and been turned away from in October and again in December 2013. It’s third encounter in 6 months, this time around EUR/USD‘s is testing the confluence of 1) the 61.8% fibonacci retracement of 2011-2012’s 1.20-1.50 range, 2) rising wedge resistance; and 3) symmetrical triangle descending trend line resistance.
EUR/USD – Monthly: Confluence of Resistance Inside 6-Year Symmetrical Triangle
A break above 1.39 removes the key technical obstacle between EUR/USD and a retest of 2011’s highs near 1.50. On the other hand, if demand sputters out at this level as it did in Q4 2013, wedge support near 1.33-1.34 provides the first rung of support, while a break below finds last year’s lows near 1.28 as the next foothold down, followed by major long-term horizontal support between 1.23-1.25.
Twitter: @andrewunknown and @seeitmarket
Author holds no exposure to instruments mentioned at the time of publication. Commentary provided is for educational purposes only and in no way constitutes trading or investment advice.
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