Welcome to a very important US CPI day, which is widely expected as numbers can give us more clarity about what’s the FED going to do next. Will they look for more hikes, even to 50bp if data disappoints, or will inflation come even lower, and they are done with hikes soon? No one knows the answer at this point, but what we know is that the corrective drop on EURUSD looks incomplete and that we are waiting on A-B-C formation.
Notice that EURUSD pair came sharply down since start of February following FED, ECB and BoE policy decisions. We can see a strong sell-off through the rising trendline support when the price accelerated lower after good US jobs data reported for January. From an Elliott wave perspective we see that drop as an impulse so ideally there will be more weakness coming. However, we will be tracking only a three-wave drop, an A-B-C structure; currently still in subwave wave (B) so more weakness can be seen after the rally back to 1.08 resistance.
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