Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0225.
- Add a stop-loss at 1.050.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0420 and a take-profit at 1.0520.
- Add a stop-loss at 1.0350.
The EUR/USD price pulled back ahead of the upcoming American and European consumer confidence data. It moved below 1.0400 as the US dollar index rebounded. It was trading at 1.0365 on Tuesday, which was about 9% above the lowest point this year.
Consumer confidence and inflation
The EUR/USD price formed a double-top pattern ahead of important economic data from Europe and the United States. In the morning session, the European Commission will publish the latest consumer and business confidence data.
Economists polled by Reuters expect that consumer confidence dropped to -23.9 in November as inflation remained at an elevated level. They also expect that the business and consumer survey improved from 92.5 in October to 93.5.
The pair will also react to the upcoming preliminary German and Spanish consumer inflation data for November. Economists expect that the headline consumer inflation in Germany declined to -0.2% as the price of natural gas retreated. In Italy, the headline CPI is expected to have dropped from 0.3% to 0.2%.
These numbers will likely imply that the European Central Bank (ECB) will continue hiking interest rates in the coming meetings. Recent ECB speakers have hinted towards another 0.75% rate hike in December.
The EUR/USD price will next react to the latest American consumer confidence data by Conference Board. Economists believe that confidence retreated from 102.5 in October to 100 in November. Confidence is an important data because consumer spending is the biggest component of the American economy.
The US will also publish the latest house price index (HPI) data. With mortgage rates surging, house prices in the US have been in a strong downward trend in the past few months. The data is expected to show that the house price index dropped from -0.7% to -1.2% in September.
EUR/USD forecast
The EUR/USD price formed a double-top pattern at 1.0482. The neckline of this pattern is at 1.0226. Its Bollinger Bands have narrowed. At the same time, the Relative Strength Index (RSI) has tilted to the neutral point. In price action analysis, the double-top pattern is usually one of the top reversal patterns.
Therefore, the pair will likely have a bearish breakout as sellers target the neckline of the double-top pattern at 1.0223. The stop-loss of this trade will be at 1.0482.
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