Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0650.
- Add a stop-loss at 1.0500.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0525 and a take-profit at 1.0450.
- Add a stop-loss at 1.0625.
The EUR/USD exchange rate remained in a consolidation phase as traders focused on the ongoing war in Israel and its impacts on the market. It was trading at 1.0551 on Tuesday morning, a few points below last Friday’s high of 1.0600.
War in Israel implications
The biggest EUR/USD news was the raging war in Israel, which started on Saturday. This led to a flight to safety, which led to higher crude oil prices and the US dollar. American stocks also retreated as the war went on.
Historically, the impact of these events tends to be short-lived. In this case, traders will focus on the extent of the war and whether other regional players in the region like Saudi Arabia and Iran will be involved.
The pair also wavered after another weak German economic data. According to the statistics agency, the country’s industrial production dropped for the fourth straight month as construction and energy output retreated.
The German industrial production dropped by 0.2% in August. It has dropped by 1.5% below the monthly average in Q2. These numbers mean that the country’s economy likely contracted again in the second quarter.
There will be no major European economic data on Tuesday. Therefore, the EUR/USD pair will react to events in Israel, where the war is expected to lead to more death and destruction in the region.
Meanwhile, in the United States, the focus will be on statements by key Federal Reserve speakers like Neel Kashkari, Raphael Bostic, and Christopher Waller. These officials will likely comment on last week’s non-farm payrolls (NFP) data.
The next EUR/USD news will be the upcoming Federal Reserve minutes and US consumer price index (CPI) data on Thursday. These two events will help to determine what to expect in next month’s meeting.
EUR/USD technical analysis
The EUR/USD pair bottomed at 1.0447 on October 3rd and started bouncing back. It has formed an inverted head and shoulders pattern on the 4H chart. It has risen above the descending trendline that connects the highest swings since September 17th. This price was the neckline of the inverted H&S pattern.
It has moved above the 25-period moving average while the Money Flow Index (MFI) has risen above the neutral point of 50. Therefore, the pair will likely continue rising on Tuesday. This view will be confirmed if the pair moves above the resistance at 1.0600.
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