Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0925.
- Add a stop-loss at 1.0827.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0830.
- Add a stop-loss at 1.0975.
The EUR/USD price retreated sharply on Friday after a hawkish statement by Jerome Powell, the head of the Federal Reserve. It crashed to a low of 1.0827, its lowest point since November 14th. It has dropped by over 1.2% from its highest point in November.
Key economic data ahead
The EUR/USD pair crashed hard after a statement by Powell who warned against complacency among market participants. He pushed back against the view that the bank was about to cut interest rates.
He argued that inflation was still at an elevated level and that the Fed could still hike interest rates in the coming months. Most economists are expecting the bank to cut rates by 0.25% in the first half of next year.
The Fed wants to see more evidence that inflation is moving downwards. The most recent data showed that the headline Consumer Price Index (CPI) dropped from 3.7% in September to 3.2% in October.
There are signs that inflation is easing, helped by goods, which have moved into deflation. The prices of durables have dropped in the past five straight months, helped by products like furniture and used cars. Services, on the other hand, seen their prices jump in the past few months.
There will be no economic data from Europe and the United States on Monday. The key catalyst will be a statement by Christine Lagarde, the head of the European Central Bank (ECB). Like the Fed, most economists believe that the bank will maintain rates unchanged and then cut them in 2024.
The other important numbers this week will be the upcoming US jobs numbers. The Bureau of Labor Statistics will release the JOLTs job vacancies data on Tuesday and Non-Farm Payrolls (NFP) on Friday. Economists believe that the NFP figure rose to 180k in November.
EUR/USD technical analysis
The EUR/USD pair retreated sharply last week as it dropped from last week’s high of 1.1018 to a low of 1.0827. On the 4H chart, it has retreated below the Woodie pivot point at 1.0925. It has also dropped below the 50-period and 25-period moving averages.
The pair has formed a hammer candlestick pattern, which is a bullish sign. Therefore, the outlook for the pair is bullish, with the next reference level to watch being the Woodie pivot point at 1.0925. A break above that level will see it rise to the psychological level of 1.0950.
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