The inflation data didn’t disappoint and allowed the EUR/USD to escape from the mid-term sideways trend. Not directly, because the data was released yesterday, and the breakout just happened today. However, the increased momentum can be attributed to Wednesday’s CPI.
EUR/USD fell in a sideways trend at the end of April. The sideways trend can technically be described as a rectangle (orange). We had a horizontal resistance on the 1.058 and a horizontal support on the 1.048, around the 100 pips range. Over the past few days, that tedious sideways movement became even less interesting, and the volatility drop allowed for a smaller pennant (blue) to be created.
CPI helped to introduce some life into the price. After the initial roller coaster, the price chose the southward direction. We broke the lower line of the pennant and the horizontal support on 1.048. EUR/USD set new, long-term lows and triggered a refreshed sell signal.
We may see an upward movement at some point, which would be typical price action for testing the broken support as a resistance. As long as we stay below the lower orange area, the sentiment is negative.