Bearish view
- Set a sell-stop at 1.0724 and a take-profit at 1.0665.
- Add a stop-loss at 1.0825.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0765 and a take-profit at 1.0850.
- Add a stop-loss at 1.0685.
The EUR/USD exchange rate wavered ahead of an important week in the financial market. The pair was trading at 1.07610 on Monday, a few points above last Friday’s low of 1.0725. It has remained much lower than November’s high of 1.1017.
Fed and ECB decision ahead
This will be the most important week for the EUR/USD pair in December as the US publishes crucial inflation data and as the Fed and European Central Banks (ECB) makes their final decisions of the year.
The US published encouraging jobs report on Friday. According to the Bureau of Labor Statistics, the economy added over 190k jobs in November while the unemployment rate retreated to 3.7%. Wage growth continued growing during the month.
The next important economic report will be the upcoming US Consumer Price Index (CPI) data set for Tuesday. Economists polled by Reuters believe that the headline CPI remained at 3.0% in November.
However, some analysts suspect that inflation retreated below 3% for the first time in months. Besides, the average price of gasoline has dropped to the lowest level in more than 2 years.
The other crucial event will be the coming FOMC decision, which is scheduled for Wednesday. The Fed Rate Monitor tool shows a 99% chance that the Fed will leave rates unchanged between 5.25% and 5.50%.
This will be an important meeting because it will come after the US has published the most important data: inflation and jobs. As such, the committee will likely provide guidance on what to expect in 2024.
Most analysts expect the Fed will start cutting rates in the first half of the year. Goldman Sachs, on the other hand, sees the bank starting the cuts in the August meeting.
The other important decision will come from the European Central Bank (ECB), which is expected to leave rates unchanged.
EUR/USD technical analysis
The EUR/USD pair has been in a strong downtrend in the past few weeks. After falling to 1.0725 on Friday, it bounced back to 1.0761 as traders waited for the upcoming inflation data and ECB and Fed decisions. On the 4H chart, it remains below the 25-period and 50-period moving averages.
The pair has also moved between the 50% and 38.2% Fibonacci Retracement levels while the Money Flow Index (MFI) has moved to the neutral point. Therefore, the outlook for the pair is still bearish ahead of this week’s events. A break below last week’s low at 1.0724 will see it drop to the 61.8% retracement point at 1.0665.
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