Baxia Markets
January 11, 2024

Euro Eyes Breakout as US Inflation Looms: Ascending Channel in Focus

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The Euro-Dollar pair (EURUSD) has spent the past few days trapped in a sideways dance, etching an ascending channel on the charts. This curious behavior comes after a sharp tumble from December 28th, 2023, to January 3rd, 2024, erasing nearly 250 pips. But today, the tides could turn, thanks to a slew of key economic data releases from the US, specifically the Consumer Price Index (CPI) and Initial Jobless Claims.


Economists, it seems, are holding their breath and predicting a robust US economy with higher-than-expected numbers across all CPI readings and slightly elevated jobless claims. This, if true, would likely paint a picture of a strengthening dollar and potentially put the Euro on its back foot. However, a mixed data outcome could throw a wrench in the works, paving the way for a EURUSD resurgence.


But beyond the economic tea leaves, there's a fascinating technical story unfolding on the 1-hour chart. The Euro's price action is currently contained within a channel, reminiscent of a prizefighter circling its opponent. The key indicators – the EMAs – still paint a bearish picture, with the EMA 50 below the EMA 200.

Euro Eyes Breakout as US Inflation Looms: Ascending Channel in Focus

Nonetheless, a glimmer of hope flickers as the EMA 50 inches closer to its big brother, hinting at a potentially waning bear grip. Even more exciting, prices have managed to break and close above the EMA 200, injecting a dose of bullish energy into the fight.


The ultimate confirmation of a reversal, however, would come in the form of a golden cross – a technical holy grail where the EMA 50 decisively crosses above the EMA 200. Yet, the market's current state of hesitation makes oscillator indicators like MACD and RSI somewhat unreliable for trend identification.


However, if the bulls manage to break above the upper channel line at 1.09984, coupled with MACD and RSI conditions flashing green with histogram and signal line above zero and RSI crossing 60%, then all bets are off! Such a confluence of events would scream: "Bulls in charge!"


On the other hand, should the Bears flex their muscles and push prices below the lower channel line at 1.09035, with MACD and RSI plunging below zero and RSI dipping below 40%, then the bearish tango continues.


In conclusion, today's US economic data holds the key to unlocking the true trajectory of EURUSD. A robust US economy might fuel a Dollar rally, while a mixed bag could unleash the Euro's pent-up potential. Regardless, the technical picture whispers of a potential battle at the channel borders, with the golden cross and the MACD/RSI tango acting as the deciding factors. Whether the Euro ascends to new heights or succumbs to the Dollar's dominance, one thing's for sure: buckle up, fasten your seatbelts, and keep your eyes glued to the charts, because the next act in the EURUSD drama is about to unfold.


Key Economic Releases to Watch Today

USD, Core CPI (MoM) (Dec)

Forecast 0.3% vs Previous 0.3%

USD, CPI (MoM) (Dec)

Forecast 0.2% vs Previous 0.1%

USD, CPI (MoM) (Dec)

Forecast 3.2% vs Previous 3.1%

USD, Initial Jobless Claims

Forecast 210K vs Previous 202K

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