On the daily chart below, we can that there’s a possible double top pattern with the high at 0.6514 and the neckline at 0.6191. If the price falls below the neckline, the pattern should be confirmed and the measured target would be in the 0.5900 area.
The divergence between the second top and the MACD is also an extra signal of weak upside momentum and it strengthens the pattern.
The moving averages are pointing to further downside movement as the blue short period moving average is below the red long period moving average. As things stand, the price should at least get to the neckline.
On the 4 hour chart below, we can see a ranging price action as traders are trying to decide if we get to a soft landing where inflation is falling and the labour market remains resilient and one where inflation doesn’t come down to the Fed’s 2% target requiring higher rates and eventually a hard landing.
Yesterday’s CPI report came out basically as expected and we just saw pure choppiness, but the M/M readings are too high to hope for a return to the Fed’s target. In fact, the market priced out cuts this year and the terminal rate is now seen a bit higher than what the Fed has projected in December.
Nevertheless, the sellers will need to firmly break the support at 0.6270 to extend the move to the neckline or lower. The buyers will need to get above the 0.6413 resistance as that would be the last line of defence for sellers.
On the 1 hour chart below, we can see more closely the range that’s been going on for over a week now. The 38.2% Fibonacci retracement level found sellers and there’s also a much stronger level at 0.6413 where we have a previous swing resistance and the 50% Fibonacci level.
For now, the sellers are in control and today’s Retail Sales report will probably yield some movement.
If the data beats expectations, we may see more downside in the pair as it’s more likely that the market is now considering good news as bad news due to a possible higher terminal rate. On the other hand, a miss may get us back into the range.
