Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0840.
- Add a stop-loss at 1.06900.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0680 and a take-profit at 1.060.
- Add a stop-loss at 1.0750.
The EUR/USD price was little changed on Thursday morning as market participants waited for the important US inflation numbers. It also reacted to a hawkish statement by a senior European Central Bank (ECB) official. The pair was trading at 1.0747, where it has been in the past few days.
US inflation data ahead
The US will publish the most important data of the month later on Thursday. It will publish the closely-watched consumer inflation data. These numbers will come at a time when the US is sending mixed signals on inflation. On the one hand, goods inflation has dropped sharply, helped by low oil and gas prices. At the same time, service inflation has moved upwards in the past few days.
Economists expect that the headline consumer inflation dropped from 0.1% in November to 0.0% in December. This decline will translate to a year-on-year increase of 6.7%, which will be lower than the previous 7.1%. Core inflation is expected to have risen from 0.1% to 0.3% leading to a YoY gain of 5.7%.
The main data to watch will be the superior inflation, which is made up of services excluding housing. That is also the number that the Fed has been focusing mostly on recently. Weak inflation numbers will be bullish for the EUR/USD pair because they will mean that the Fed could be forced to become a bit dovish.
On the other hand, higher-than-expected inflation numbers will lead to a pullback of the pair as the US dollar strengthens.
The EUR/USD pair also reacted mildly to the hawkish statement by Olli Rehn, the head of the Finnish central bank. In a statement, he said that the ECB should continue implementing more rate hikes. While inflation has eased recently, it remains significantly higher than the 2% target.
EUR/USD forecast
The EUR/USD pair has been in a tight range in the past few days as the market waits for the upcoming US inflation data. It remains slightly above the important resistance level at 1.0717, the highest point on December 30 and 15. The pair has been stuck at the first resistance point of the standard pivot point.
Therefore, the pair will likely have a bullish breakout as buyers target the second resistance point at 1.0840. The stop-loss of this trade will be at 1.0690.
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