The euro is set to master the target range of 1.0758-1.0787 this morning. According to our main scenario, I expect the formation of the price divergence with the Marlin oscillator and the euro’s reversal to a medium-term decline.
It is impossible to predict how high the price will still be able to grow in case the CPI falls, but from a purely technical perspective, a reversal can take place even from current levels, which indirectly implies CPI values are higher than forecasts. The forecast for December CPI is 6.5% y/y versus 7.1% y/y in November, while the forecast for the core index is 5.7% y/y versus 6.0% y/y. It is likely that this strong decline in inflation is causing traders to expect them with excessive optimism.
The forecast for monthly inflation, or more precisely core CPI for December, is 0.3% versus 0.2% in November, with the overall monthly CPI forecast at 0.0% versus 0.1% a month earlier. In other words, the data could end up disappointing. Albeit not by much, but enough to keep investors from buying counter-dollar currencies.
On the four-hour chart, the price and the Marlin oscillator have a structure similar to the formation of a divergence. We have to wait for the US inflation report and make a decision according to the market behavior.
The uptrend will break in case the price falls below 1.0660, that is, when it crosses the support of the MACD line.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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