While this week does contain the potential for some fireworks, few were probably expecting matters to develop so quickly ahead of the European Central Bank rate decision on Thursday. Starting at about 9PM ET yesterday, EUR/USD began to breakout to the upside, again, and the move hasn't yet stopped. This breakout has cleared above the psychologically-important 1.1500 level, as well as the bullish trend channel that's defined EUR/USD price action for much of 2017.
EUR/USD Hourly Chart – Emphasis on Bullish Breakout Beyond 1.1500-level
Chart prepared by James Stanley
This breakout has pushed EUR/USD into territory that hasn't been seen for over 14 months, and even then – those prior swings were rather fleeting as sellers had quickly taken-over to re-drive prices back-down towards lows. But, this area does offer a couple of swings that could be usable as potential resistance, specifically for profit targets on bullish approaches; or perhaps even as short-term resistance to lead-in to a long re-entry setup. The level at 1.1615 is the last profit target for our Analyst Pick setup on Long EUR/USD earlier in July. Just beyond this area, we also have a swing at 1.1714 that could be setup as a potential resistance level.
EUR/USD Daily – Prior Price Action Swings as Potential Resistance Levels
Chart prepared by James Stanley
Pound Break-Down
On the other side of the coin, the British Pound has been selling-off this morning after inflation came-in below expectations. Inflation for the month of June in the U.K. printed at 2.6%, well-below the 2.9% print in May that had sent pulses racing under the premise that the BoE may be looking at rate hikes sooner-rather-than-later. With June inflation coming-in a bit less aggressive, this may remove some pressure from the prospect of higher rates in the U.K., and correspondingly the British Pound has sold-off on the news.
The bigger question is whether bulls will come-in to support the move under the expectation that inflation will continue to remain brisk. With price pressures still running above the BoE's 2% target, and given that this is a trend that's been taking place longer than the past month with inflation running above the bank's target, and we likely haven't heard the last of this story yet.
