EUR/USD Bulls Respond to CPI-Induced Dip; WTI Tests Bull Flag Resistance

Talking Points:

– This morning brought a many new Euro-Zone acceleration numbers to a table, and a missed-print brought a discerning support exam in a Euro that, during this point, has been soundly faded out of a market.

– Retail traders continue to sojourn net brief in EUR/USD with a stream review of -1.57-to-1, as of this writing.

– Looking for trade ideas? Check out a trade guides. And if you’re looking for something some-more interactive in nature, check out a DailyFX Webinars.

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Over a past 6 weeks, a Euro has been on utterly a ride. As we came into October, a undeniably critical ECB assembly sat on a calendar for after in a month, and a vast expectancy was that we’d finally hear a bank’s skeleton on what they were going to do with impulse when a stream module lapsed in Dec of this year. Given a improving line-up of fundamentals, total with a large volume of impulse that’s already taken place, a expectancy was flourishing that we’d hear a ECB tract a plan for exiting stimulus, with a contingent bump-higher in rates, maybe even as early as 2018.

But when we got to a ECB rate preference in October, none of that was announced. The ECB simply extended their module into Sep of subsequent year while shortening a volume of monthly bond purchases. There was no proclamation for when a change piece competence start being reduced, nor where there any warnings of tentative rate hikes. As a matter of fact, a ECB pronounced that they were formulation on gripping rates during stream levels for a foreseeable future, unspoken to meant during slightest until a finish of subsequent year.

This radically deflated a thesis that had helped to expostulate a singular banking aloft for many of a year, with a hastening of a pierce in Apr after a initial spin of French elections resolved with a rather market-friendly outcome. The Euro gathering aloft as we changed around a year, yet a Oct ECB rate preference finally pennyless EUR/USD subsequent a pivotal section of support that had reason a lows in a span for a improved partial of 3 months. In brief order, it looked as yet that bullish thesis in a Euro that had spin so built-in around a year competence finally spin around.

EUR/USD Daily: ECB-Weakness Last Two Weeks, Bulls Drive Prices Back Above Key Zone

EUR/USD Bulls Respond to CPI-Induced Dip; WTI Tests Bull Flag Resistance

Chart prepared by James Stanley

The bearish thesis in a Euro usually lasted for a integrate of weeks. We saw this take place by a initial half of November, and we even saw a build of bearish structure around a Non-Farm Payrolls news progressing in a month.

Two weeks ago, when German GDP was expelled during a .8% review for Q3, amounting to a .6% review for a Euro-zone, that bullish thesis began to come behind with a vengeance. Within brief sequence we were right behind above that support zone, and surging towards a organisation of swing-highs that had showed adult in Oct usually forward of a ECB’s rate decision. At that point, a bearish thesis was on a wire and there were even bullish delay possibilities starting to show. As we wrote, there were setups on both sides of a marketplace that could be worked with.

As prices moved-up to exam that organisation of before swing-highs, a sharpened star arrangement formed, that is a bearish annulment setup, and this played out for roughly a full week, until prices ran into that support section again. Bulls came back, pushed prices aloft and we pennyless above resistance, serve entrenching a bullish thesis on a singular currency.

EUR/USD Four-Hour: Bulls Return after German GDP (in blue); Support Shows during Top of Zone (Red)

EUR/USD Bulls Respond to CPI-Induced Dip; WTI Tests Bull Flag Resistance

Chart prepared by James Stanley

This morning brought a many new Euro-Zone CPI imitation to a table, and this came-in subsequent expectations. The all equipment figure rose to an annualized 1.5% contra a expectancy for a 1.6% bump, while core CPI came-in during .9% contra a expectancy of 1.0% flat. Last month saw title CPI during 1.4%, so we had a slight alleviation there even yet we missed expectations; and core was during .9% final month, so a prosaic review notwithstanding a expectancy for a bit of improvement. Logically, this should volume to some component of Euro debility as softer acceleration produces a reduction melancholy backdrop for a ECB as we pierce into 2018, with reduction procedure to poke rates or tie process in response to stronger rates of inflation.

The net response was a dump in a Euro, yet that was fast bought by traders. Prices changed subsequent a area of before insurgency from those Oct swing-highs, usually to shortly return. But, this did give us a technical lower-low shortly after another lower-high, so near-term cost movement could still be competent as bearish here.

EUR/USD Hourly: Fresh Lower-Low after Euro-Zone CPI; Firm Bullish Response Follows

EUR/USD Bulls Respond to CPI-Induced Dip; WTI Tests Bull Flag Resistance

Chart prepared by James Stanley

Perhaps a many engaging partial of this stream regard is a follow-thru response. Bulls used this morning’s dump to supplement to prolonged positions, and this highlights usually how volatile a Euro has been this year even with a ECB remaining dovish, attempting to equivocate a run of strength in a banking that might moderate acceleration as we pierce into 2018.

On a daily chart, we can see where EUR/USD is attempting to reason higher-low support after a bullish detonate over a past integrate of weeks. Yesterday constructed a Doji around support/prior resistance, and this morning’s down-side wick exposes a annulment that’s taken place around this morning’s CPI report.

EUR/USD Daily: Bulls Respond to Support/Prior Resistance; Potential for Bullish Continuation

EUR/USD Bulls Respond to CPI-Induced Dip; WTI Tests Bull Flag Resistance

Chart prepared by James Stanley

OPEC Deal Extended

The OPEC prolongation cuts that have helped to support Oil prices were extended to a finish of subsequent year, as we’d discussed final week in a trade foresee on Oil. US Oil prices have been trade within a bearish channel over a past week, and this comes after an intensely bullish run that has lasted for a full 5 months.

This bearish channel began to uncover and support has come-in during a longer-term Fibonacci level. The cost of 57.24 is a 38.2% Fibonacci retracement of a 2014-2016 vital move. This turn had helped to set insurgency progressing in Nov with 5 uninterrupted trade days throwing sellers during this level. After a discerning correction, cost movement eventually mounted above this level; and this was being driven by a integrate of opposite factors. We had a available of these prolongation cuts being extended; yet there was also a shutdown of a TransCanada tube that delivers Crude into Cushing, Oklahoma; a smoothness indicate for WTI futures.

So, this was another supply imprisonment combined on to a available of prolongation being gradual good into subsequent year. These dualing bullish factors helped Oil prices make a intrepid try during a $59 level, and that’s when this stream longhorn dwindle began to show.

WTI/USOil Hourly: Bull Flag Formation from Last Week’s Highs

EUR/USD Bulls Respond to CPI-Induced Dip; WTI Tests Bull Flag Resistance

Chart prepared by James Stanley

A topside mangle of a dwindle opens a doorway for bullish continuation; and for those that’d like to proceed a setup a bit some-more conservatively, available a mangle of a before swing-high around 58.29 could make a available of bullish prolongation some-more attractive.

WTI Daily: Support during Prior Fibonacci, Swing-High Resistance

EUR/USD Bulls Respond to CPI-Induced Dip; WTI Tests Bull Flag Resistance

Chart prepared by James Stanley

— Written by James Stanley, Strategist for DailyFX.com

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