EUR/USD - A Major Break Lower

OANDA:EURUSD   Euro / U.S. Dollar
The dollar rallied strongly on Wednesday after data showed inflation rose to a 31-year high in the US.

Coming on the back of Friday's fantastic jobs report and the 20-year high in the quarterly employment cost index the week before, this doesn't bode well for a Fed intent on being patient on raising interest rates.

The central bank has repeatedly stated its belief that inflation is transitory. It may have to amend this language soon as it's neither fading fast nor remaining remotely close to target, which makes the central bank's argument harder for investors to believe.

Markets aren't waiting for guidance. Today's data may have been the final straw and they're pricing in more rate hikes next year. The dollar has broken higher, pushing EURUSD to its lowest level since July last year.

The next test for the pair falls around 1.14, where the bottom of the channel coincides with prior support and resistance . Below here 1.12 will be a major support level .

If the pair corrects, 1.15-1.1550 is the obvious first test with it having been such a key level of support this past month.