Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0750.
- Add a stop-loss at 1.0560.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0560 and a take-profit at 1.0450.
- Add a stop-loss at 1.0650.
The EUR/USD price continued consolidating in a period characterized by thin volumes and low volatility. It was trading at 1.0632, which was below this month’s high of 1.0726. The pair reacted mildly to the new Russian decree on oil sales and US house price data.
Crude oil prices rebound
The EUR/USD exchange rate moved sideway after the latest decree by Vladimir Putin. In it, he said that Russia will stop supplying oil and oil products to countries that are complying to the recently passed supply cap. The cap was placed by the UK, EU, US, and some other allies. Some of these countries had already banned the importation of Russia’s seaborne Russian crude.
The new rules by Russia will take place on February 1 and run through July 1. Brent, the international benchmark, rose to $85 while West Texas Intermediate (WTI) jumped to $80. As a result, there are concerns that soaring prices will have an impact on inflation in most countries. Recent data showed that inflation was inching down in the US and Europe.
US Treasuries rose as crude oil prices jumped. The yield of the 10-year government bond rose to 3.85% while the 30-year and 2-year rose to 3.94% and 4.40%, respectively. Analysts believe that higher oil prices could leave inflation at an elevated level and force the Fed to be more hawkish.
The EUR/USD pair reacted to the latest US home price numbers. Data published by S&P showed that house prices fell by 0.50% in October. On a year-on-year basis, house prices dropped from 10.7% to 9.2%.
Analysts expect that home prices will continue to normalize in the coming months after they jumped sharply during the pandemic as mortgage rates fell. The only data that will come out on Wednesday will be the upcoming US existing home sales data.
EUR/USD forecast
The EUR/USD pair has gone nowhere in the past few days. It was trading at 1.0650, where it has been since December 14. The pair is consolidating at the 25-day and 50-day moving averages while the MACD has moved above the neutral point. It is also slightly above the lower side of the ascending channel shown in black.
The pair has also formed a small falling channel that resembles a widening wedge pattern. Therefore, there is a likelihood that the pair will have a bullish breakout as buyers target the next key resistance point at 1.0740.
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