After Monday’s decline, the pair finds support today and awaits the US CPI inflation update and the latest policy decision by the Fed for the next leg of the move

The EURUSD trades in its daily area of strength between the upper blue and red bands (blue arrow). The longer this region is maintained, the greater the likelihood of further appreciation. The market seems to be pricing in strength ahead of Wednesday's Fed release and Thursday's ECB statement.

FXCM's USDOLLAR basket remains subdued in its daily bear channel between the lower blue and red bands (green rectangle). However, this position will apply more downward pressure to the greenback if it maintains.

The pair has been consolidating its gains recently, as markets brace for a data - heavy week, which includes CPI inflation from the US and the UK, as well as the interest rate decisions by the Fed and the ECB

The pair made a strong start to the week, reacting from the recent four-month lows, but has been consolidating its gain over the last few days

The pair is on the back foot this week, as markets digest recent strong US economic data and contemplate the rate path of the Fed and the ECB

The pair finds support after its poor start to the week, as the RBA kept the door open to more rate increases, while markets continue to assess the Fed’s path and monitor the pandemic news form China

The EURUSD continues to trade in its bullish channel (between the upper blue and red bands) on its daily time frame. However, the hourly chart does show a pullback is in effect, with the EMAs and stochastic both in bear mode. There is a triple confluence of support at the central pivot - the 50% Fibonacci level and price support overlap. Thus, this may be a level that is attractive…

Whilst the core PCE came in under expectations, we are cautious. On Friday, wage inflation printed 0.6% MoM, double the monthly forecast of 0.3% MoM. This surprise means that average hourly earnings are up 5.1% YoY compared to last month's 4.9%.

The EURUSD has pushed higher into the daily chart's bullish channel between the upper blue and red bands. The hourly chart shows bullish developments too. Its trend-following EMAs have developed angle and separation to the upside, and the stochastic is looking to cross up (black ellipses). If the stochastic pushes above 80 and maintains, an underlying bullish momentum will be building, which may take EURUSD passed its R2 pivot level.

Yesterday at the Brookings Institution, Fed Chair Powell confirmed the slowing of policy tightening. The 14 December hike has close to an 82% probability of 50bps as opposed to 18% for 75bps. However, the Fed Chair suggested a higher terminal rate than anticipated.