Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1100.
Add a stop-loss at 1.1270.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1270.
Add a stop-loss at 1.1100.
The EUR/USD pair has pulled back over the past few days as the US Dollar Index (DXY) climbed, with investors waiting for several key events. These include a potential US-Iran escalation and interest rate decisions from the Federal Reserve and the European Central Bank (ECB). The pair has dropped to 1.1200, a few points below the highest level it has reached this month.
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European Central Bank (ECB) and Federal Reserve Decisions
The EUR/USD pair has dropped slightly as attention shifts to the upcoming Federal Reserve interest rate decision. Recent US macroeconomic data has reinforced expectations that the Fed will leave rates unchanged at this meeting, an outcome that Fed Chair Kevin Warsh has also hinted at.
Data released earlier this month showed that the labor market worsened in September, with the economy adding just 29,000 jobs. The unemployment rate rose from 4.1% to 4.2%, while wage growth was lower than expected. Also, the Bureau of Labor Statistics (BLS) revised the August jobs numbers downwards.
The EUR/USD pair will also react to several important metrics like US consumer confidence, house price index, and durable goods orders. These numbers will help the Fed when making its decision in December.
The pair will also react to the European Central Bank (ECB) decision on Thursday. Like the Fed, the bank is expected to leave interest rates unchanged at 2.65%. The decision comes at a time when European inflation has remained above the bank’s 2% target.
The EUR/USD pair is also reacting to the ongoing protests in France and other European countries. These protests are expected to hurt the second-biggest economy in the bloc.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has remained under pressure in the past few months. It dropped to 1.1200, a few points below last week’s high of 1.1269.
The pair has remained below the 50-day Exponential Moving Average (EMA). Also, the Supertrend indicator has stayed in the red, suggesting that the bearish trend will continue in the near term.
On the positive side, the pair has formed an inverted head-and-shoulders pattern, a common bullish reversal sign.
Therefore, the pair will likely remain under pressure, potentially to the psychological level of 1.1115, its lowest level this month. On the other hand, a move above the resistance level of 1.1270 will invalidate the bearish outlook.
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