Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0700.
- Add a stop-loss at 1.0500.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0570 and a take-profit at 1.0500.
- Add a stop-loss at 1.0650.
The EUR/USD price moved sideways on Tuesday morning as thin trading persisted in the market. It was trading at 1.0620, which was a few points above last week’s low of 1.0570. This price was a few points below this month’s high of 1.0737.
ECB official points to more rate hikes
The EUR/USD price was in a tight range on Tuesday morning. While markets remained open, volume was extremely thin as many traders remained in holiday mode. This volume is expected to remain low this week as investors take a breather.
The pair reacted mildly to an extremely hawkish statement by Klaas Knot, the head of the Dutch Central Bank. In it, he warned that interest rates will remain at an elevated level for a while. In his opinion, the ECB has now gone halfway through its tightening cycle as inflation remains at a multi-decade high.
He also said that the bank will likely hike rates in all the coming five meetings. The ECB has already hiked rates by 250 basis points and hinted that quantitative tightening will start in March. Its most recent rate hike happened almost two weeks ago.
Europe’s inflation remains stubbornly high while risks for a recession have risen sharply in the past few months. The most recent economic data showed that the headline consumer price index (CPI) rose by 10.6% in November.
There will be no economic data from Europe. The only important economic data will be from th United States. S&P will publish the latest house price index for October. Economists expect the numbers to reveal that the house price index dropped by 0.6% after rising by 0.1% in the previous month.
US home prices have been in a freefall as interest rates have risen to the highest level in more than a decade.
EUR/USD forecast
The EUR/USD price has been in a bearish trend in the past few days. It has managed to drop from a high of 1.0735 to a low of 1.0620. This price is above the lower line of the ascending channel shown in black. It has also formed a small descending channel shown in green.
It is also consolidating at the 25-day and 50-day moving averages and the standard pivot point. Therefore, the pair will likely remain in this range on Tuesday as thin volumes remain.
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