The euro currency surged higher against the US dollar after the US CPI report, with the EURUSD pair moving above its 50-day moving average and testing levels not seen since early July.
Going forward, bulls need to anchor the price above the 1.0290 level, which represents the EURUSD pair’s 50-day moving average. The 50-day moving average has been known as a significant market launch pad during recoveries.
It is possible that the US dollar could start to decline over the coming weeks as Jackson Hole approaches as the market starts to price in “peak inflation” in the United States and more aggressive action from other central banks, other than the Fed.
Technically, the US dollar index is trading in a large rising broad expanding wedge pattern, which if correct could start to sink the US dollar index several hundred points to the downside.
In order for the EURUSD pair to progress, we do need to see that broad-based US dollar weakness as the fundamentals surrounding the eurozone remain very poor heading into the winter months.
I would suggest keeping a close eye on the 1.0290 to 1.0400 price range over the coming days as a break of this range could set about the next 100-point directional move.
Something that could be a challenge right now is sentiment towards the EURUSD. Sentiment has started to neutralize, and generally this suggests that an asset is not yet ready to breakout.
The ActivTrader Market Sentiment tool shows that some 49 percent of traders are bullish towards the EURUSD. This is pointing to range bound trading activity and suggests more range trading ahead.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that the EURUSD pair has broken a rising price channel that is located between the 1.0100 and 1.0300 level. Typically, such patterns are bullish.
According to the potential upside target, as measured by the size of the rising price channel pattern, we could reasonably expect to see the EURUSD pair testing towards the 1.0500 level. Bulls need to continue to defend the 1.0300 level.
EURUSD Medium-Term Technical Analysis
Looking at the daily time frame a large head and shoulders pattern has been activated now after the price moved under 1.0600. This is the pattern to watch over the medium-term horizon.
Bulls have recently started to test towards the neckline of the mentioned price pattern. If bulls move the price above or the price get rejected it will be the defining moment for the EURUSD pair.