Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0500.
- Add a stop-loss at 1.0670.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0670.
- Add a stop-loss at 1.0500.
The EUR/USD exchange rate was hovering near its lowest level since November last year as investors reflected on the decision by Washington to avoid a government shutdown. The pair retreated to a low of 1.0570 on Monday, a few points below last Friday’s high of 1.0620.
Busy week ahead
The EUR/USD pair has had a rollercoaster in the past few weeks as the dollar strength gained steam. Precisely, the pair has dropped in the past eleven weeks straight, the longest streak in years.
The pair has dropped mostly because of the rising risks in the market. Some of the most notable risks are the ongoing UAW strike in the United States. This strike could lead to a major impact on the American economy since the auto industry accounts for over 3% of the economy.
There are also inflation risks as the price of crude oil jumped to over $95. It has jumped by more than 30% from the lowest level this year and analysts expect that the trend will continue. JP Morgan analysts believe that oil could jump to over $150 in the coming months.
Further, the Federal Reserve has pointed to more rate hikes even as the economy shows signs of slowing down. Fortunately, the much-feared government shutdown was averted during the weekend.
Looking ahead, there will be several important events that will impact the EUR/USD pair. For example, Jerome Powell will deliver his first speech after the Fed made its decision in September. In that meeting, the dot plot pointed to another hike this year.
The other crucial event will be the latest non-farm payrolls (NFP) data set for Friday. These numbers are expected to show the economy remained tight in September. S&P Global will publish the latest manufacturing and services PMI numbers.
EUR/USD technical analysis
The EUR/USD pair continued the bearish trend as the US dollar index rally gained steam. On the 4H chart, the pair has formed a descending channel shown in black. It has moved between this channel and it remains below the 50-period moving average. At the same time, the Relative Strength Index (RSI) has moved to the neutral point of 50.
Therefore, the outlook for the pair is bearish, with the next reference level to watch will be at the psychological level at 1.0500.
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