EUR/USD: Bears reinforced ahead of the US CPI release

• The EUR's failed attempt to retake the pennant has strengthened the bear case.
• An above-forecast US CPI reading will likely add to the bearish pressure around the EUR/USD.

The EUR/USD closed yesterday at 1.1527 –  the lowest level since July 20, 2017 –  having faced rejection at the lower end of the pennant (former support-turned-resistance) on Wednesday.

The failure to retake the pennant on Wednesday, followed by a bearish daily close yesterday, validates the last week's pennant breakdown and has likely strengthened the case for a drop below 1.15.

Focus on the US CPI

The data, scheduled for release at 12:30 GMT, is expected to show the cost of living as represented by the consumer price index (CPI) rose 0.2 percent month-on-month in July. An above-forecast print would bolster the already bearish technical setup and open the doors to a drop below 1.15.

On the other hand, EUR/USD could have another ago at the pennant resistance (lower end of the pennant) if the US CPI prints below estimates. That said, only a daily close above the 10-day moving average (MA), currently located at 1.1603, would reduce the bearish pressure. This is because the MA has proved a tough nut to crack in the previous two trading days.

At press time, the EUR/USD is trading at 1.1532.

EUR/USD Technical Levels

Resistance: 1.1564 (5-day moving average), 1.1603 (10-day moving average), 1.1628 (Wednesday's high)

Support: 1.1508 (June 21 low), 1.1463 (daily pivot support 2 + 100-week moving average), 1.1364 (200-week moving average)