The euro is starting to break down against the US dollar currency after the US CPI report for last month seriously caught traders unaware with a greater increase than anticipated.
On Friday the EURUSD pair crashed towards the 1.0500 level as the US dollar index exploded higher as trader priced in more aggressive rate hikes form the US central bank.
The annual pace of inflation in the US rose to 8.6% in May according to the latest Consumer Price Index data released by the US Bureau of Labour Statistics on Friday.
The May year-on-year reading was above the expected reading of 8.3%. MoM, the headline inflation rate was 1.0%, and well above the expected rise to 0.7% from 0.3% back in April.
Core measures of the CPI also came in hotter than expected. YoY, core prices were up 6.0%, above the expected drop to 5.9% from 6.2% a month earlier. MoM, the rise in core prices was also higher than expected at 0.6% and unchanged versus one month ago, versus expectations for a drop to 0.5%.
Something that is good for the downtrend right now is that traders are bullish towards the EURUSD at all. Sentiment is rising while the EURUSD pair looks higher.
The ActivTrader Market Sentiment tool shows that some 66 percent of traders are bullish towards the EURUSD. This is suggesting for more price losses this week and may even in June.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that the EURUSD pair has been trending sharply higher since the 1.0350 level, and had largely reached the target of a large, inverted head and shoulders pattern.
The large, inverted head and shoulders pattern could actually be reversed and turned into a head and shoulders pattern. If the price moves under 1.0400 watch out for a further crash.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame things only look bad for the EURUSD pair has moved convincingly above the 2020 swing low, just or slightly above the 1.0500 level.
If the EURUSD pair continues to hold and moves under the 1.50 area this week, then watch for an attack towards the 1.0300 region or even towards the benchmark 1.0000 level.
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