Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0900.
- Add a stop-loss at 1.1050.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0985 and a take-profit at 1.1050.
- Add a stop-loss at 1.0900.
The EUR/USD price was flat on Thursday morning after mixed signals from Europe and as traders waited for the upcoming US inflation numbers. The pair was trading at 1.0967, a few points higher than Wednesday’s low of 1.0910.
US Inflation Numbers
The EUR/USD pair reacted mildly to a statement by ECB’s vice president. In a statement, Luis de Guindos warned that the bloc was heading towards another downturn in Q4. He expects that inflation could remain above 2% for a while.
In a separate statement, Isabel Schnabel, a member of the ECB board warned that it was too early to start talking about rate cuts. These statements mean that the ECB could delay in cutting rates even as the economic growth wanes.
Recent data shows that the bloc’s manufacturing and services PMIs remained below 50 in December. Other numbers showed that retail sales and industrial production continued falling last month.
The most important EUR/USD news will be the upcoming US inflation report, which forms an important part of the Fed’s dual-mandate role. Economists expect the data to show that inflation remained steady in December.
According to Investing, economists expect the data to show that inflation rose slightly to 3.2% in December. They also see the core inflation falling from 4.0% to 3.8%. These numbers will be higher than the Fed’s target of 2.0%.
There are signs that inflation is falling. Brent, the global oil benchmark, has retreated to $76.70 while the West Texas Intermediate (WTI) fell to $71.35. Natural gas prices also pulled back after rising sharply in the past few weeks.
Meanwhile, US bond yields continued falling. The 10-year yield fell to 4.0% while the 30-year fell to 4.16%. This is a sign that traders anticipate rate cuts in the coming months.
EUR/USD Technical Analysis
The EUR/USD pair has remained in a consolidation phase this week as attention shifts to the upcoming US inflation numbers. This price action is in contrast to last week’s sell-off, which saw it drop from 1.1140 to 1.0880. The pair is sitting at the 50-period moving average.
It has also formed a bearish flag pattern, which is a popular continuation pattern. Therefore, the pair will likely have a bearish breakout after the US inflation numbers. If this happens, the next point to watch wil be the psychological level at 1.0900.
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