Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.075.
- Add a stop-loss at 1.0650.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD at 1.0680 and a take-profit at 1.0600.
- Add a stop-loss at 1.075.
The EUR/USD pair bounced back in the American session even after the relatively weak European economic data. After dropping to a low of 1.0660 on Wednesday, the pair rebounded to a high of 1.0700.
European concerns remain
The European economy is going through major headwinds. Economic numbers published last week revealed that the bloc’s manufacturing and services PMIs remained below 50 in October.
A separate report released on Wednesday showed that the bloc’s retail sales dropped for the third straight month. Sales fell by 0.3% in October, a bigger fall than the median estimate of 0.2%. This decline translated to a YoY of 2.9%.
Another report by the European Central Bank (ECB) showed that the perception of nominal spending growth dropped for the second straight month in September. Meanwhile, in a statement, Mario Draghi, the former head of the ECB warned that the bloc would move into a recession by the end of the year.
In its recent decision, the ECB decided to leave interest rates unchanged at a record high of 4.1%. It was the first time in eleven meetings that the bank left rates intact. Most analysts expect the bank to maintain status quo in the coming meetings.
The EUR/USD pair bounced back as US bond yields continued falling. The 10-year yield dropped to 4.53% while the 30-year fell to 4,52%. These bond yields have been falling after the Federal Reserve decided to leave rates unchanged between 5.25% and 5.50%.
The sell-off accelerated after the latest US Non-Farm Payrolls (NFP) data. According to the Bureau of Labor Statistics (BLS), the economy added 150k jobs while the unemployment rate rose to 3.9%.
The next key EUR/USD news will be the upcoming US initial jobless claims numbers and a statement by Jerome Powell.
EUR/USD forecast
The EUR/USD exchange rate dropped to a low of 1.0660 on Wednesday, which was along the Fibonacci pivot point. It has moved above the 50-period moving average and the crucial resistance point at 1.0695, the highest swing on October 24th.
The Relative Strength Index (RSI) and the Stochastic Oscillator have pointed upwards. Therefore, the pair will likely continue rising as bulls target the next important resistance at 1.075. This price is both the highest point on Friday and the first resistance of the Fibonacci pivot point.
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