The EUR/USD pair is on track to move above the 1.20 level, once again, after a major reversal at the 1.17 area. The pair formed an inverse head and shoulders pattern at 1.17, bounced higher, and now marches toward 1.20 on the back of higher inflation in the United States.
Inflation in the United States exceeded the forecast as both headline and core data shown significant increases in prices. The Fed’s Powell later today will likely reiterate that the increase in inflation is temporary, mainly driven by higher oil prices.
Speaking of the crude oil price, it is back above $60 with a vengeance. It trades now even higher than $61, once again reflecting the main theme in the markets – a lower USD.
The ECB is also much to blame for the EURUSD bullish reversal. The bank failed to deliver on its promises of higher PEPP purchases, and the market participants took it as a hawkish, a tightening sign. Yet, the European economies are suffering, as clashes in Italy between restaurant and hotel owners and employees and policy suggest another bad year for the services industry.
EUR/USD Technical Analysis
Bulls may want to stay on the long side for 1.20, but strong resistance ahead is likely. On the other hand, bears may try to short the pair at 1.20 with a stop at 1.21 and targeting a move below 1.17 again.