The EUR/USD rallied in the last hours and now it stands at 1.1578 level. The Dollar Index plunged, pulling the greenback down. The pair challenges a confluence area, a valid breakout above it may signal a potential upside reversal in the short term.
As you already know, the US Consumer Price Index came in better than expected while the Core CPI has come in line with expectations. Unfortunately, USD bulls reacted badly to these releases. Higher inflation is not always good for the USD. Also, the DXY was located right below a major resistance area, so a temporary decline was somehow expected.
The FOMC Meeting Minutes are likely to be decisive. This high-impact event could boost or demolish the USD.
EUR/USD bounced back
EUR/USD failed to stabilize under the 1.1529 static support or to reach the 1.1520 weekly S1 signaling exhausted sellers. It has jumped through the confluence area formed at the intersection between the downtrend line with the Descending Pitchfork's median line (ML).
Registering a valid breakout above this confluence area may announce an upside reversal. Only invalidating the breakout could signal a new sell-off. Personally, I'll wait for the price to confirm the current breakout before considering going long. 1.1602 - 1.1612 area is seen as a strong resistance, so maybe the price needs to accumulate more energy before taking out this zone.
EUR/USD could develop an important leg higher if it confirms the current breakout through the confluence area. As you know from my analysis, the bias is bearish as long as it stays under the median line (ML). Jumping and stabilizing above the median line (ML) could announce a bullish reversal.