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Triple Top Pattern Points to More Down

The EUR/USD pair drifted downwards ahead of the latest American consumer inflation data scheduled for later today. 

  • Sell the EUR/USD pair and set a take-profit at 1.0876 (38.2% retracement).
  • Add a stop-loss at 1.1030.
  • Timeline: 1-2 days.
  • Set a buy-stop at 1.0990 and a take-profit at 1.1050.
  • Add a stop-loss at 1.0900.

The EUR/USD price dropped to the lowest level since May 2 ahead of the upcoming American consumer price index (CPI) data. The pair moved to a low of 1.0945, which was much lower than the year-to-date high of 1.1090.

The EUR/USD pair drifted downwards ahead of the latest American consumer inflation data scheduled for later today. Economists expect the data to show that inflation remained above the Fed target of 2.0%.

Precisely, analysts believe that the headline CPI remained unchanged at 5.0% on a year-on-year basis. They also expect that the CPI rose from 0.1% to 0.4% on a MoM basis. Meanwhile, core inflation, which excludes volatile food and energy prices, is expected to drop from 5.6% to 5.5%.

These are important numbers because of their impact on the Federal Reserve. They are also crucial because they come a week after the Fed interest rate and the strong US jobs numbers. In a statement, the Fed decided to hike interest rates by 0.25% and continue with its quantitative tightening (QT) process.

The inflation numbers come a few days after the US published the latest non-farm payrolls (NFP) data. In a statement, the data showed that the economy added over 254k jobs in April while the unemployment rate dropped to 3.4%.

Therefore, the EUR/USD pair will likely continue falling if the US published strong inflation numbers. That’s because these numbers will provide the Fed with the impetus it needs to continue hiking interest rates in the coming months.

The EUR/USD pair will also react to the upcoming German consumer inflation data. These number are expected to show that the German inflation inched downward in April but remained above the ECB’s target of 2.0%.

The EUR/USD pair dropped sharply ahead of the upcoming American inflation data. It declined below the ascending trendline shown in orange. This trendline connects the lowest level since April 3. The pair also formed a triple-top pattern at 1.1088. In price action analysis, this pattern is usually a bearish sign. It has moved below the support at 1.1028, the highest point on February 2.

The pair has moved to the 23.6% Fibonacci Retracement level and dropped below the 25-day moving average. Therefore, the pair will likely continue falling as sellers target the 38.2% retracement point at 1.0876.


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