EUR/USD:Possible Retracement Before A New LONG Impulse

EUR/USD retreated to the 1.0850 area early Friday after having touched its highest level since April at 1.0868 late Thursday. The near-term technical outlook suggests that the pair could stage a technical correction before the next leg higher but losses are likely to remain limited. The retracement could reach the level of 38.2% Fibo from the last swing low, around area 1.07250 with the first target of attention 1.07800 where the price could have a first stop before growing again. A Divergence in RSI may confirm the possibility for the price for a correction in a short time before growth.

The data published by the US Bureau of Labor Statistics revealed on Thursday that annual inflation in the US, as measured by the Consumer Price Index (CPI), declined to 6.5% in December from 7.1% in November as expected. The Core CPI, which excludes volatile food and energy prices, fell to 5.7% from 6%. Both of these readings came in line with analysts' estimates and the US Dollar Index fluctuated wildly while market participants tried to figure out how these data would influence the Federal Reserve's rate outlook.

Dovish comments from Fed officials, however, made sure that investors continued to move away from the US Dollar.

The next long target for EUR/USD 1.09200 area.

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