Bullish view
- Buy the EUR/USD and set a take-profit at 1.0200.
- Add a stop-loss at 1.000.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 0.9925 and a take-profit at 0.9850.
- Add a stop-loss at 1.0100.
The EUR/USD price continued its recovery process as the market waited for the upcoming interest rate decision by the European Central Bank (ECB). It rose to a high of 1.0086, which was the highest level since September 13 of this year. It has recovered by more than 5.6% from its lowest level this year.
ECB decision ahead
The ECB will conclude its two-day meeting on Thursday. Economists expect that the bank will deliver another giant 0.75% rate hike as it continues its battle against the soaring inflation. If this happens, it will be the second straight 0.75% rate hike. It will push he deposit rate to 1.5%, the highest level since 2009.
In addition, the bank will start deliberations on quantitative tightening (QT). The bank’s balance sheet has risen from about 2 trillion euros ten years ago to a figure that equates to about 70% of the bloc’s total GDP.
Another key issue will be its decision on the targeted longer term refinancing operations (TLTRO). These are its ultra-cheap loans that it provided to banks during the pandemic and total about 2.1 trillion euros.
The ECB decision comes at a difficult time for the European economy. Inflation has surged to more than 10% and business output has started falling. Flash manufacturing and services PMI numbers declined below 50 in October.
The situation is so bad that some companies have started moving their plants from the region. On Wednesday, BASF, the biggest chemicals company in the world, said that it will have to downsize permanently in Europe due to the soaring energy costs.
The EUR/USD pair will also react to the first reading of US Q3 GDP data. Economists expect the numbers to show that the economy expanded by 2.4% in Q3 after falling by 0.6% in the previous quarter.
EUR/USD forecast
The four-hour chart shows that the EUR/USD pair has been in a strong bullish trend in the past few days. It managed to move above the important resistance level at 1.000, which was the highest level on October 15.
The pair has moved above the 25-day and 50-day moving averages. At the same time, the Relative Strength Index (RSI) has kept rising. It is also approaching the third resistance level of standard pivot point.
Therefore, the pair will likely continue rising as buyers target the fourth resistance point at 1.0200. It could also retest the support at 1.00 and then resume the bullish trend.
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