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Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0700.
- Add a stop-loss at 1.0800.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0820 and a take-profit at 1.0920.
- Add a stop-loss at 1.0750.
The EUR/USD pair has found a strong resistance level as concerns about a recession continued. The exchange rate dropped to 1.0800, which was lower than this week’s high of 1.0890. It has remained significantly above the lowest level this year.
US white-collar layoffs continue
The EUR/USD pair declined slightly as more American companies continue announcing big layoffs. On Wednesday, Microsoft announced that it will lay off 10k people as growth in its business slowed. The announcement came a few days after Goldman Sachs said that it will fire over 3,200 people.
Other large companies that have announced layoffs are Salesforce, Amazon, Unity Software, and Meta Platforms among others. Still, it is unclear whether these layoffs will have an impact on the unemployment rate and wages. Data published this month showed that there were over 10 million vacancies in the United States while the unemployment rate remained at 3.5%.
The layoffs, however, signal that many executives believe that many American companies believe that the economy is moving into a recession.
Meanwhile, data by the Commerce Department showed that retail sales dropped in December even as inflation dropped. The headline and core retail numbers declined by 1.1% in December as interest rates remained at an elevated level.
Meanwhile, the producer price index (PPI) declined from more than 7% in November to 6.2% in December. Core PPI declined to 5.5%, signaling that inflation continued dropping during the month. Last week, data showed that the headline and core consumer inflation dropped in December.
Another risk that investors are pricing in is the American debt ceiling. Republicans in the House of Representatives said that they will only pass a debt ceiling expansion if the Biden administration proposes substantial spending cuts.
The EUR/USD pair will react to the latest US housing starts and building permits, Philadelphia Fed manufacturing data, and ECB’s minutes.
EUR/USD forecast
The 4H chart shows that the EUR/USD pair has reached a top at about 1.0900. It has formed a triple-top pattern, which is usually a bearish sign. It has moved between the 50-day and 25-day moving averages while the MACD has moved below the neutral point. The pair has also moved to the pivot point of the Woodie pivot points. Therefore, the pair will likely continue falling as sellers target the next key support level at 1.0710.
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