- The shared currency recovers from early daily losses close to 1.1600.
- The US IPP index rose a tick more than expected, but investors are focused on Wednesday’s CPI readings.
- EUR / USD: A double bottom coupled with a positive divergence on the daily chart could propel the pair higher.
The pair EUR/USD remains stable during the day, unable to extend its two-day rally, trading around 1.1590 in the last hour.
The shared currency bounced off daily lows around 1.1570 for the day as US bond yields fell sharply during the American session, acting as a headwind for the dollar. Nonetheless, gains could be limited as the US Dollar Index recovers, approaching 94, shedding 0.08% at 93.98 at press time.
The US PPI remains stable at around 8.6% annually
On Tuesday, the US economic agenda invented the Producer Price Index (PPI) for October, which in its main figure expanded 0.6%, higher than the 0.5% estimated by economists. In year-on-year figures, the PPI increased 8.6%, in line with the forecast. Furthermore, the underlying PPI for the same period on a monthly basis increased by 0.4%, slightly more than expected, while the annual base number was in line with estimates at 6.8%.
The report released by the Bureau of Labor Statistics (BLS) noted that higher energy costs drove the gain in wholesale prices. In addition, he mentioned how in recent months, bottlenecks in transportation, material shortages and rising labor costs pushed prices up throughout the economy.
The EUR / USD reaction was muted, although this is a US inflation report, investors’ focus is on consumer inflation readings.
On Wednesday, the US economic agenda will present the Consumer Price Index (CPI) for October, on which market participants are focused, as the dovish tone of the Federal Reserve spurred a sell-off in the market of bonds, while US Treasury yields fall. Additionally, initial jobless claims for the week ending November 6 will be revealed.
The eurozone economic agenda will show inflation figures for Germany, and Bundesbank Weidmann will make statements. In addition, the ECB will host a non-monetary policy meeting.
EUR / USD Forecast: Technical Outlook
The daily chart shows that a double top pattern could form for the shared currency. The 1.1524 price level tested unsuccessfully six times acts as a bottom for the EUR / USD pair, but on the upside, 1.1616 is the barrier to overcome, on its way to the double bottom “neckline” at the 28th high. October at 1.1691.
The Relative Strength Index (RSI) is at 47, slightly above, but remains below the 50 midline, indicating that selling pressure remains. However, there is a subtle positive divergence, with the RSI showing higher lows, while the EUR / USD price action touches lower lows. However, to resume the short-term bullish bias, the RSI must break above the 50 center line to accelerate the uptrend.
Technical levels / Support and resistance levels
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