EUR/USD Lower, but Stable as German EU-Harmonized CPI Edges Up 9.6%

The Euro is trading sharply lower on Tuesday after German state inflation data showed an easing of price pressures in December, indicating national inflation may also have slowed for a second month due in part to the government’s one-off payment of household energy bills.

However, the single-currency is bouncing off its intraday low after German consumer prices, harmonized to compare with other European Union countries, rose by 9.6% on the year in December, according to preliminary data from the Federal Statistics Office.

At 14:11 GMT, the EUR/USD is at 1.0570, down 0.0095 or -0.89%. Last Friday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $98.80, up $0.36 or -0.36%.

Traders are now bracing for the release of the U.S. Final Manufacturing PMI and Construction Spending reports. The PMI data is expected to come in at 46.2, matching the previous read. Construction Spending is expected to have fallen by 0.4%, worse than the previously reported -0.3%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down earlier today when sellers took out the previous main bottom at 1.0576. A move through 1.0795 will change the main trend to up.

The nearest resistance is a 50% level at 1.0619. The closest support is a 50% level at 1.0542.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at 1.0542 is likely to determine the direction of the EUR/USD on Tuesday.

Bearish Scenario

A sustained move under the 50% level at 1.0542 will indicate the presence of sellers. If this creates enough downside momentum then look for a sharp break into the main bottom at 1.0443.

Taking out 1.0443 will indicate the selling pressure is getting stronger. Not only will this reaffirm the downtrend, but it could also trigger an acceleration to the downside with the next major target zone 1.0263 – 1.0137.

Bullish Scenario

A sustained move over 1.0542 could trigger a short-covering rally into the next 50% level at 1.0619. Since the trend is down, sellers could come in on a test of this level. Overtaking it could extend the intraday rally.