On the daily chart below, we can see that the price found resistance at 0.7139 and got pushed lower as the strong NFP report reignited fears of higher inflation for longer requiring a stronger response from the Fed via even higher interest rates. The price found support at 0.6850 and it’s trading below the trendline.
The moving averages crossed to the downside and are now pointing south signalling a possible reversal in the trend.
A beat to the expectations should give the USD strength as the market will reprice expectations for higher rates, on the other hand, a miss should see the USD under pressure and the price returning possibly to the resistance at 0.7139.
On the 4 hour chart below, the setup for the sellers is quite clear. The broken trendline and 38.2% Fibonacci retracement level should offer a strong resistance to lean on for further shorts.
It may also print an “ugly” head and shoulders pattern which will give sellers some extra confirmation for a downside move. Unfortunately, any good technical setup can fail when there’s a strong fundamental catalyst against it, so the best thing would be to wait for the results.
On the 1 hour chart below, we can see the current ranging price action as the market awaits the CPI report. The zone between 0.6985 and 0.7050 is where we should find sellers. The last line of defence should be at 0.7050 where we have the previous swing point resistance and the 61.8% Fibonacci retracement level.
In case the CPI beats expectations we should see the downtrend resuming though and the support at 0.6850 breaking giving the sellers the greenlight for a major move.
