EURUSD rises on EU CPI and US labor data, bear-trap forming on daily chart

EURUSD bounced on Wednesday after a triple rejection at 1.0800 support zone (50% retracement of 1.0666/1.0948 rally / daily Kijun-sen) signals formation of a bear-trap.

Fresh gains were sparked by higher than expected EU inflation numbers in July which improved Euro’s sentiment and below expectations US ADP private sector payrolls signaling softening in US labor market and adding to Fed rate cut narrative.

Markets shift focus to the key event of the day – FOMC rate decision. The US central bank is expected to stay on hold in July policy meeting, but to provide more hints about their next steps at Chair Powell’s press conference.

The Fed is widely expected to start cutting interest rates from September, with more signals from the central bank, to deflate dollar and further boost the single currency.

Technical picture on daily chart is mixed (conflicting MA’s, negative momentum and north-heading RSI) and lacks clearer technical signal, although fresh gains point to development of reversal signal on daily chart.

However, such scenario will need confirmation, with lift and close above 1.0850 zone (falling 10DMA / Fibo 38.2% of 1.0948/1.0798 bear-leg) seen as minimum requirement to validate bullish signal and expose upper pivots at 1.0870 zone (lower platform / 50% retracement).

Only sustained break below 1.0800 pivot would neutralize fresh bulls and signal continuation of larger downtrend from 1.0948 (July 17 top).

Res: 1.0850; 1.0870; 1.0890; 1.0902
Sup: 1.0807; 1.0800; 1.0773; 1.0732