Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0645.
- Add a stop-loss at 1.0500.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0550 and a take-profit at 1.0500.
- Add a stop-loss at 1.0650.
The EUR/USD exchange rate continued its downward trend ahead of the upcoming European Central Bank (ECB) interest rate decision. The pair slipped to a low of 1.0572, lower than this week’s high of 1.0700.
ECB interest rate decision ahead
The EUR/USD rate continued falling after another set of strong US economic data. The report showed that the housing sector was doing well even as interest rates surged. New home sales rose to 759k in September, higher than the median estimate of 680k.
The Federal Reserve has hiked interest rates from zero to a two-decade high of between 5.25% and 5.50%. Therefore, as the economy does well, there is a likelihood that the Fed could continue hiking rates in the coming months.
The next important catalyst for the EUR/USD pair will be from the United States and Europe. In the US, the statistics agency will publish the latest US GDP and durable goods order numbers.
Economists expect the data to show that the economy expanded by more than 4% in Q3. The median estimate, according to Reuters, is 4.2% while analysts at Goldman Sachs expect it to come in at 4.7%.
Still, there are signs that the economy was starting to slow down. For one, millions of Americans have started paying back their student debt. At the same time, many people are working two jobs. Further, economists believe that core durable goods orders rose by 0.2% in September.
The most important EUR/USD news will be the upcoming ECB decision. Economists believe that the bank will leave interest rates intact at a record high of 4.0%. It will use the pause to study the current state of the economy. Data published on Wednesday showed that the bloc’s money supply continued falling.
EUR/USD forecast
The EUR/USD exchange rate slipped to an important support level. It dropped to a low of 1.0570, the lower side of the broadening wedge pattern. It also slipped below the key support level at 1.064, the highest swing on October 12. This price was also the 23.6% Fibonacci Retracement level.
The pair moved below the 50-period moving average while the MACD and the Relative Strength Index (RSI) drifted downwards. Therefore, the outlook for the pair is bullish now that it has retested the lower side of the wedge. If this happens, the initial level to watch will be at 1.0645.
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