Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1700.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1700.
- Add a stop-loss at 1.1500.
The EUR/USD exchange rate rose as traders waited for the flash inflation report from the European Union. It was trading 1.1600, up from the November low of 1.1500.
Federal Reserve and European Central Bank Divergence
The EUR/USD exchange rate rose as traders waited for the upcoming European inflation report. Economists polled by Reuters expect the upcoming report to show that the headline inflation remained at 2.1% in November, while the core CPI moved from 2.4% to 2.5% during the month.
These will be the final inflation numbers that the European Central Bank receives before the bank meets on December 18. These numbers come a few days after Germany and Spain reported strong inflation figures, while France and Italy reported softer-than-expected inflation numbers.
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Some ECB officials have noted that inflation will remain in the current phase at the current level for a while. In separate statements, Vice President Luis de Guindos and Christine Lagarde noted that interest rates were appropriate.
The EUR/USD pair also rose amid hopes that the US inflation will come down in the coming months. Data shows that gasoline prices dropped to $3 a gallon, the lowest level in over four years. Gasoline is one of the most important part of the inflation report because it tends to impact transport costs.
The next key EUR/USD news will be a speech by Michele Bowman, a top Fed official. Bowman, like Christopher Waller, has hinted that she supports interest rates to fall in the coming meetings.
Her statement comes at a time when odds of a Federal Reserve interest rate cut have risen to 90% on Polymarket and other prediction marketplaces like Kalshi.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD exchange rate has rebounded in the past few days, moving from a low of 1.1490 on November 21 to a high of 1.1647.
The pair has moved slightly above the upper side of the symmetrical triangle pattern and the 50-day Exponential Moving Average (EMA).
However, there are signs that the pair’s rally has lost momentum, with the Average Directional Index (ADX) pointing downwards. It has also formed a shooting star candlestick, which is made up of a small body and a long upper shadow.
Therefore, the pair will likely resume the downward trend and possibly retest the key support level at 1.1500. A move above the upper side of the shooting star candle will invalidate the bearish outlook.
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