Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0900.
- Add a stop-loss at 1.1085.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1025 and a take-profit at 1.1125.
- Add a stop-loss at 1.0850.
The EUR/USD pair remarkable rally gained steam as the US dollar sell-off continued. It jumped to a multi-month high of 1.1010 during the Asian session as the DXY index moved below $103 for the first time since August.
US GDP data ahead
The EUR/USD will be in the spotlight on Wednesday as the US publishes the second estimate of Q3 GDP data. The initial report published in October showed that the economy jumped by 4.9% in Q3 after expanding by 2.3% in the previous month.
These numbers revealed that the economy was doing well, helped by a resilient consumer and business investments. The US will also publish the latest real consumer spending data for Q3 and personal consumption expenditure (PCE).
These numbers will come a day after the US published encouraging consumer confidence and housing data. According to the Conference Board, the country’s confidence rose to 102 in November as inflation continued easing.
Another report revealed that home prices jumped to a record high in September. The closely watched CoreLogic Case-Shiller National Home Price Index (HPI) rose by 3.9% from the same period in 2022. It had increased by 2.9% in the previous month.
While home sales have dropped recently, prices have rallied because of the relatively low inventories in the market. Many potential home sellers have stayed away from the market because they don’t want to give up the low mortgage rates.
Mortgage rates have retreated recently as hopes of Fed cuts has increased. These hopes increased on Tuesday after Christopher Waller, a Fed official hinted that the bank will slash rates in 2024 if inflation continues falling. That was an important statement since Waller is one of the most hawkish Fed officials.
The case for rate cuts has been strengthened by the falling inflation. The most recent data revealed that the headline consumer inflation fell to 3.2%.
EUR/USD technical analysis
The EUR/USD pair has been in a strong uptrend after bottoming at 1.0450 in Octover. On the daily chart, it has risen above the 23.6% Fibonacci Retracement level. It has also crossed the first support of the Andrews Pitchfork.
The EUR/USD exchange rate has also risen above the 50-day moving average. Similarly, the Average Directional Index (ADX) has risen to 40, signaling that the trend has strength. A closer look also shows that it has formed a head and shoulders pattern.
Therefore, the pair will likely retreat slightly on Wednesday as some traders start to take profits. If this happens, the next point to watch will be at 1.0900. This view will be invalidated if it moves above 1.1085.
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