Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1100.
Add a stop-loss at 1.1300.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1300.
Add a stop-loss at 1.1100.
EUR/USD rose modestly on Wednesday morning as the selloff that began on Monday lost momentum. The pair climbed to 1.1204, about 52 pips above this week’s low of 1.1152, as investors focused on the upcoming US inflation report and a statement from Kevin Warsh.
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US Inflation Data and Kevin Warsh Statement
The EUR/USD pair rose slightly as market participants waited for the upcoming US inflation report. Economists polled by Reuters expect the upcoming report to show that the headline Consumer Price Index (CPI) rose from 3.4% in August to 3.6% in September.
Core inflation, which excludes the volatility food and energy products, is expected to move from 2.4% to 2.5%, further extending from the Federal Reserve’s target of 2.0%. A move to that level will raise the possibility that the Fed will maintain a hawkish tone.
US inflation has been elevated in the past few months, and this trend may continue in the near term. Brent, the global benchmark, rose to $107, while the West Texas Intermediate (WTI) moved to $95.27.
The statement comes a day before Kevin Warsh delivers his first speech after the last monetary policy meeting. In this statement, he will react to the latest consumer inflation report and provide hints on what to expect in the last two meetings of the year.
The EUR/USD pair will react to the statement from Tom Barkin, a top Fed official. In a statement on Wednesday, John Williams, the head of the New York Fed, said that he expects the Fed to leave rates unchanged for the remainder of the year.
This statement comes as US bond yields pull back, with the ten-year falling slightly to 5.22% and the five-year to 5.01%.
EUR/USD Technical Analysis
The four-hour chart shows that the EUR/USD pair has crawled back after falling to 1.1151 on Monday to the current 1.1202. The pair remains below the Supertrend indicator, a sign that bears remain in control. It has also remained below the 50-period Exponential Moving Average (EMA).
The Relative Strength Index (RSI), on the other hand, has formed an ascending channel. It has moved above the neutral level of 50. Therefore, the pair will likely resume the downtrend, potentially to the key support level of 1.1151. A drop below that level will point to more downside, potentially to 1.1100.
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