Euro (EUR) slid down against the U.S. Dollar (USD) last week, decreasing the price of the EURUSD pair to less than 1.2300 ahead of the release of the US Consumer Price Index (CPI) news. The technical bias remains bullish because the pair printed a higher high in the recent upside move.
Technical Analysis
As of this writing, the EURUSD pair hovers around 1.2221, with multiple support levels in sight. The pair is likely to find some support near the given below price levels:
Short-Term Support Levels
1.2171, a key horizontal support
1.2062, the 38.2% Fibonacci retracement
1.1885, the low of November 26, 2020
The support levels are demonstrated in the given below daily chart.
On the upside, the EURUSD pair is likely to face some resistance near the price levels mentioned below:
Short-Term Resistance Levels
1.2348 – a major horizontal resistance
1.2400 – the psychological number
1.2515 – the 38.2% fib level resistance
The technical bias should remain bullish as long as 1.2171, a major horizontal support, remains intact.
U.S. Consumer Price Index
The US Department of Labor is scheduled to release the stats for the Consumer Price Index (CPI) excluding food and energy on Wednesday (January 13, 2021). According to the average projections of economists, the consumer price index registered a reading of 0.1 percent in December, as compared to a reading of 0.2 percent in the month before.
The US Consumer Price Index Ex Food & Energy is an estimate of change in the retail prices of different products and services selected from different sizes of stores countrywide through targeted sampling. It is pertinent to mention here that the stats for the U.S. Consumer Price Index doesn’t include the prices of volatile products such as food and energy in a bid to remain unbiased.
Generally speaking, a higher reading of CPI is considered good for the U.S. economy and vice versa. A better than expected reading of CPI means bearish trend for the EURUSD pair and vice versa.
Conclusion
Considering the macroeconomic outlook of the pair, here is a short to medium term trading plan for the EURUSD:
Sell EURUSD if the price gives a daily closing below the 1.2150 handle, with a 50 pips stop loss and a target of at least 150 pips.