EUR/USD Looks Set For Short Term Correction As Inflation Remains Steady

The Euro (EUR) slid down against the US Dollar (USD) on Tuesday, dragging the EUR/USD to less than 1.3690. The sentiment remains bearish due to Lower Low (LL) in the recent correction wave. Not to mention, the Eurozone inflation remained steady in June in line with the median projection of economists.

Technical Analysis

As of this writing, the pair is being traded around 1.3682. A hurdle can be noted around 1.3690, the 38.2% fib level ahead of 1.3748, the 50% fib level and then 1.3806, the 61.8% fib level. The sentiment will however remain bearish as far as the 1.3993 resistance area is intact.  

eurusd-d1-capital-trust-markets[1]On the downside, the shared currency is likely to find a support around 1.3640, the intraday low of yesterday ahead of 1.3618, the 23.6% fib level and then 1.3502, the swing low of the recent correction wave as demonstrated in the above chart. A break below the 1.3502 support area could spur a deeper correction towards the old levels around 1.3000-33000.

Eurozone Inflation

Inflation in the Eurozone remained 0.5% in June as compared to the same rate of inflation in the month before, a report by the EuroStat revealed yesterday, meeting the average forecast of economists. Generally speaking, higher inflation rate is considered positive for the developed economies such as the Eurozone. The steady inflation rate might prompt the European Central Bank (ECB) to keep the forthcoming monetary policy unchanged.

Unemployment Rate

The rate of unemployment across the Eurozone remained 11.6% in May as compared to the same rate in the month before, exceeding the average forecast of 11.7%, a government report revealed today. Generally speaking, higher unemployment rate is considered positive for the economy and vice versa.

Conclusion

Considering the short term technical and fundamental outlook, selling the pair around the current levels appears to be a good strategy, the trade should however be stopped out on a daily closing above the 1.3690 resistance area. 

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Usman Ahmed

Usman Ahmed is an individual forex trader and market analyst. He holds a Masters of Business Administration (MBA) degree. His work includes fundamental and technical reports on various currency pairs, commodity futures and stock markets. His technical analysis features price action strategies.

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