Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0500.
- Add a stop-loss at 1.0700.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0635 and a take-profit at 1.0730.
- Add a stop-loss at 1.0500.
The EUR/USD exchange rate continued bouncing back as the market took on a risk-on sentiment. The pair rose to a high of 1.0620, the highest point since September 25th. This rebound coincided with the broader US dollar sell-off and the retreat of Treasury yields.
FOMC minutes ahead
The EUR/USD pair has rebounded even as geopolitical risks rose. The recent issue is the ongoing war in Israel, where the military is fighting against Hamas. It is estimated that the crisis will escalate in the coming weeks.
The risk is that other regional players in the region like Iran and Saudi Arabia will get involved, which will affect the global oil market, leading to prolonged inflation. Nonetheless, the US dollar retreated since the market believes that the war’s impact on the economy will be limited.
The EUR/USD pair also rose after the IMF published its global economic outlook. In a report, the agency left the global outlook unchanged, boosted its US forecast, and downgraded the euro zone by 0.2%. It expects that the US economy will expand by 2.1% this year and 1.5% in 2024.
The euro zone economy is expected to grow by just 0.7% in 2023 and 1.2% in 2024. Recent economic numbers from Europe have shown that the economy is in a difficult situation as the industrial production falls.
The next driver for the EUR/USD exchange rate will be the upcoming US producer price index (PPI). Economists polled by Reuters expect the data to show that the core PPi rose by 2.3% in September while the headline figure rose by 1.6%.
The Federal Reserve will publish minutes of the last meeting during the American session. These minutes will provide more information about what to expect in the coming meetings.
EUR/USD technical analysis
The EUR/USD exchange rate has been in a bullish trend in the past few days as the US dollar has eased. It has already moved above the 25-period moving average and is now along the upper side of the Bollinger Bands.
The pair has also risen above the upper side of the descending channel while the Average Directional Index (ADX) has moved below 20. This is a sign that the bullish trend is losing momentum.
Therefore, the pair will likely resume the downward trend ahead or after the FOMC minutes. If this happens, the key support to watch will be at 1.0500.
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