The mini-shock in the US CPI for October continues to affect the markets this week. EUR/USD has updated its local low and is trading below 1.14 level. The next support can be found at 1.135, where the lower border of the macro trend channel resides.

Taking into account the breakout of the medium-term downward channel by a forceful move on Monday, the bearish impulse that has arisen may lead to a false breakout to the 1.13 area, followed by a rebound.

In turn, UK labor data salvaged the pound, unlike the Euro, the cable is rising against the dollar, as the UK labor market report released on Tuesday increased the chances that the Bank of England (BoE) will raise rates at the next meeting.

The number of jobs increased by 247,000 (forecast 185,000), while unemployment fell to 4.3% (forecast 4.4%). Wage growth exceeded the forecast, posting 5.8% in annual terms (forecast 5.6%).

Wage inflation often precedes consumer price inflation, which the central bank may, in turn, respond to, so accelerating wage growth has also raised the likelihood that the Bank of England will soon begin tightening policy.

Technical Outlook

From a technical point of view, an uptrend in the pair requires a breakout and consolidation above the short-term trend line. In case of a rebound from it, a test of the lower boundary of the medium-term trend channel (1.325) is possible from where a serious correction is expected to unfold.

The Empire State Manufacturing report in the US exceeded expectations, indicating that the US economic recovery is still quite strong. For the US dollar index (DXY), the target may be the upper border of the trend channel - 96.00 points mark.