The EUR/USD currency pair overcame the trend line on Tuesday, which it has been preparing for in the past few days. So for now, the upward trend is reversed. The pair did not have time to go down too far, so the upward trend may still resume. At the same time, this will now require certain signals. For example, updating the last local peak (from Monday). It will not work to rebuild the ascending trend line so that it takes into account the last fall of the euro currency, and this makes no sense. Today the European Union published its inflation report for May. Traders expected this indicator to accelerate to 7.7%, but in reality the figure rose to 8.1% Y/Y. Thus, the situation with inflation in the European Union is much worse than even the most pessimistic forecasts. Unfortunately, there is nothing to restrain the strong growth of inflation in the European Union. Recall that even now the European Central Bank continues to inject tens of billions of euros into the economy to stimulate it. Thus, in part, it provokes an increase in inflation. We can talk about raising rates no earlier than this autumn. Until that time, the consumer price index can grow absolutely calmly. Therefore, from our point of view, the euro's decline for today is quite logical.
The technical picture on the 5-minute timeframe does not look the best. Despite the fact that today's volatility was high, the movement itself was not the most trendy. The first sell signal in the form of a rebound from the level of 1.0749 was still pretty good. After its formation, the pair went down about 50 points and stopped exactly at the target of 1.0697, rebounding from this level. But then the hit parade of false signals began. First, the pair bounced off 1.0697 and couldn't go up even 15 points, and then settled below 1.0697 and couldn't go down even 15 points. Therefore, there was a small loss on these two trades, which was covered by profit on the first short position. The remaining two signals near the level of 1.0697 should have been ignored, since at that time there were already two false signals at this level.
How to trade on Wednesday:
The ascending trendline is no longer relevant on the 30-minute timeframe. Therefore, now with a probability of 60 percent, we can expect the euro to fall. At the same time, one should not completely rule out the possibility of the resumption of the upward movement of the euro/dollar pair. We would say that now the euro is in the "border zone", from where it can both continue to grow and start a new powerful fall. On the 5-minute TF, it is recommended to trade at the levels of 1.0607, 1.0636, 1.0663, 1.0697, 1.0749, 1.0787-1.0806. When passing 15 points in the right direction, you should set Stop Loss to breakeven. The European Union will publish a report on business activity in the manufacturing sector for May. A similar index will be published in the US. However, such data will not catch the attention of traders. The speech of ECB President Christine Lagarde will be much more important, from whom the market will again expect specifics on the rate increase, as well as the ADP report in the US on changes in the number of employees in the private sector.
