Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0550.
- Add a stop-loss at 1.0650.
- Timeline: 1-2 days.
Bullish view
- Set a sell-stop at 1.0623 and a take-profit at 1.0665.
- Add a stop-loss at 1.0550.
The EUR/USD pair bounced back on its final trading day of the month as the market watched the ongoing war between Israel and Hamas. It also rebounded as traders embraced a risk-on sentiment ahead of the upcoming Federal Reserve interest rate decision. It rose to a high of 1.0610, higher than last Friday’s low of 1.0521.
Risk-on sentiment
Market participants have embraced a risk-on sentiment this week as they wait for the upcoming Federal Reserve decision. American equities jumped sharply on Monday, with the Dow Jones and Nasdaq 100 indices adding over 0.50%. The price of crude oil dropped, with Brent retreating to $86.56 and West Texas Intermediate (WTI) falling to $82.68.
The EUR/USD pair rose after important economic numbers from Europe. In Germany, the statistics agency said that the country’s economy contracted in Q3 as woes in the industrial base continued. The country contracted by 0.1% after slowing by a similar amount in the previous quarter. These numbers confirmed a recent warning by the IMF that Germany would be one of the slowest economies in the developed world.
On the positive side, consumer inflation is falling at a faster pace than expected. The headline Consumer Price Index (CPI) dropped to 3% in October, the biggest drop since June 2021. Core inflation dropped from 4.6% in September to 4.3% in October.
The EUR/USD pair will react mildly to several important European data on Tuesday. France will publish its GDP data while Germany will release the import and export price index and retail sales numbers.
While these numbers are important, their impact on the pair will be quite minimal because of this week’s Federal Reserve decision. Economists believe that the Fed will continue pausing as officials watch key economic data ahead.
EUR/USD technical analysis
The EUR/USD exchange rate bottomed at 1.0521 on Friday. This was an important price since it was along the lower side of the ascending channel. The lower side connects the lowest swings since October 3rd.
The pair has risen above the 50-period and 25-period Arnaud Legoux Moving Averages (ALMA). It has moved above the Woodie pivot point. However, it has also formed a small doji candlestick pattern. Therefore, while more gains are possible, a pull back cannot be ruled out. If this happens, the key level to watch will be at 1.0550.
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