The inflation data published yesterday in the USA caused quite a stir. Inflation unexpectedly rose in March, confirming its resilience and reluctance to decrease towards the Fed's target level of 2%. The dollar sharply strengthened on Wednesday and today maintains a bullish momentum, while the DXY index is trying to consolidate and develop an upward trend above the 105.00 mark.
The dollar's strengthening was reflected in the EUR/USD pair—it sharply declined on Wednesday, breaking through the zone of key support levels at 1.0830 (144 EMA on the daily chart) and 1.0815 (200 EMA on the daily chart).
As of writing, EUR/USD was trading near local support at the 1.0725 mark. If today's data on industrial inflation in the USA does not disappoint dollar buyers, and if the ECB officials' comments turn out to be soft, then further decline of the pair and breaking through the local support level at 1.0700 should be expected. This, in turn, may provoke a deeper decline towards the lower boundary of the downward channel on the weekly chart, passing near local support levels at 1.0550, 1.0500, and 1.0470.
In an alternative scenario, the breakout of today's high at 1.0750 may be the first signal for resuming long positions. However, only the breakout of the zone of key resistance levels at 1.0815 and 1.0830 will bring EUR/USD into the territory of the medium-term bullish market, making long positions with targets near key resistance levels at 1.0900, 1.0980, and 1.1000 preferable again.
Support levels: 1.0725, 1.0700, 1.0660, 1.0600, 1.0550, 1.0500, 1.0470, 1.0400, 1.0300
Resistance levels: 1.0750, 1.0800, 1.0815, 1.0830, 1.0900, 1.0920, 1.0980, 1.1000, 1.1040, 1.1090, 1.1100, 1.1140, 1.1200, 1.1275, 1.1300, 1.1400, 1.1500
Trading Scenarios
Main Scenario: Sell Stop 1.0715. Stop-Loss 1.0760. Targets 1.0700, 1.0660, 1.0600, 1.0550, 1.0500, 1.0470, 1.0400, 1.0300
Alternative Scenario: Buy Stop 1.0760. Stop-Loss 1.0715. Targets 1.0800, 1.0815, 1.0830, 1.0900, 1.0920, 1.0980, 1.1000, 1.1040, 1.1090, 1.1100, 1.1140, 1.1200, 1.1275, 1.1300, 1.1400, 1.1500
"Targets" correspond to support/resistance levels. This also does not mean that they will necessarily be reached but can serve as a guide when planning and placing trading positions.