Bullish view
Bearish view
- Set a sell-stop at 1.0495 and a take-profit at 1.0400.
- Add a stop-loss at 1.0600.
The EUR/USD forex price continued to consolidate ahead of important economic events and data. It was trading at 1.0548, which was a few points below this month’s high of 1.0595. Focus now shifts to the upcoming American inflation data and this week’s interest rate decisions by the Federal Reserve and the European Central Bank (ECB).
US consumer inflation data ahead
The EUR/USD price was little changed as the focus shifted to important economic data. In Germany, Destatis will publish the latest consumer inflation data. Based on the last estimate, economists expect that the headline consumer inflation dropped by 0.5% on an MoM basis, leading to an annualized gain of 10%. This decline will be because European natural gas prices tumbled in November.
The most important catalyst for the pair will be the American inflation data. All indications are that the country’s inflation eased in November as retailers unleashed discounts. Further, gasoline prices tumbled to the lowest level in 12 months.
Therefore, economists expect the data to show that the headline consumer price index dropped from 0.4% in October to 0.3% in November. On a YoY basis, they expect that inflation dropped to 7.3% while core inflation dropped by 7.3%.
All these numbers will come at an important week for the market. On Wednesday, the Federal Reserve will deliver its interest rate decision. Based on the recent minutes and officials' statements, economists believe that the bank will continue hiking interest rates since inflation is still at an elevated level.
Precisely, economists expect that the Federal Reserve will hike interest rates by 0.50% after hiking by 0.75% in the past four straight meetings. According to the WSJ, the Fed will then deliver smaller rate hikes and then hold them at a constant level and wait for inflation to drop to 2%.
EUR/USD forecast
The EUR/USD price has been moving sideways in the past few days. As a result, it is trading at the standard pivot point. It has also moved slightly above the 25-day and 50-day moving averages. It is also between the ascending channel shown in Purple.
Therefore, the pair’s movement will be determined by the latest US inflation data. A likely scenario is where inflation falls at a faster pace than estimates, pushing the pair higher. If this happens, the key resistance points to watch will be at 1.0680.
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