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Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0825.
- Add a stop-loss at 1.0650.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0660 and a take-profit at 1.0500.
- Add a stop-loss at 1.0720.
The EUR/USD price was unchanged after the latest warning by the World Bank on the global economy. It was trading at 1.0745, which was higher than last week’s low of 1.0485. It has risen sharply from the lowest level in 2022.
Global economic headwinds
The global economy will continue facing significant headwinds in 2023 as inflation remains elevated in most countries. According to the World Bank, the economy will expand by 1.3% this year, lower than the previous estimate of 3%. The bank warned that the economy was on a razor’s edge and risks falling into a recession this year.
Recent data paint a positive picture of the European economy. Last week, manufacturing and services PMI numbers showed that the sectors were in a contraction mode. On the positive side, inflation has started falling as energy prices contract. Most countries in Europe saw prices drop in December.
Natural gas prices, which soared in 2023, has started dropping because of the warmer winter. Measures by European governments to boost liquified natural gas (LNG) imports and restart coal plants has helped the region deal with inflation. Therefore, there is a likelihood that European countries will do better than what analysts were expecting.
Still, despite the drop in inflation, analysts expect that the European Central Bank (ECB) will continue hiking interest rates in the next few months.
The EUR/USD pair was also unchanged after Jerome Powell avoided talking about monetary policy in his speech on Tuesday. Therefore, he left the markets guessing about what the bank will do in the coming months.
The pair will likely remain in this range on Wednesday as the focus remains on Thursday’s inflation data. Analysts believe that inflation eased slightly in December as energy, used cars, and apparel continued retreating.
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. This rebound eased on Tuesday after the statement by Jerome Powell. It remains slightly above the important resistance level at 1.0720, the highest point on December 30th. The pair rose above the 25-day and 50-day moving averages while the MACD continued rising.
Therefore, the pair will likely remain in this range on Wednesday as the focus remains on the upcoming inflation data. It will then continue rising on Thursday as buyers target the key resistance point at 1.0825.
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