Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.1020.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0920 and a take-profit at 1.1020.
- Add a stop-loss at 1.0800.
The EUR/USD pair was flat on Tuesday morning as traders focused on the upcoming European Central Bank (ECB) decision. The pair was hovering at 1.0885, where it has been stuck at in the past few days. This price is much lower than the year-to-date high of 1.1140.
ECB decision and US data
The EUR/USD price remained in a tight range ahead of a busy week in the financial market. There will be crucial earnings from companies like Tesla, Johnson & Johnson, and Netflix. In the past, these earnings reports tend to have an impact in the market because they impact sentiment.
These results come at a time when investors have embraced a risk-on sentiment in the market. US bond yields have pulled back while the S&P 500 and Nasdaq 100 indices rose to their all-time highs on Monday.
Looking ahead, the US will publish several important economic numbers later this week. The key data to watch on Thursday will be the upcoming GDP numbers. This report will provide more information about the country’s economic growth in Q4. It will be followed by the December PCE report on Friday.
The other important EUR/USD news will be the latest decision by the European Central Bank (ECB) set on Thursday. Based on the past statements by the bank’s officials, analysts expect that the ECB will leave rates unchanged.
Unlike the Fed, the ECB has hinted that it will hold rates steady for a while since it believes that inflation remains high. The most recent data showed that the bloc’s inflation rose to 2.9% in December, much higher than the 2% target.
The challenge for the ECB is that the European economy, especially countries like Germany and France are slowing. As such, high rates will likely make the situation worse.
EUR/USD technical analysis
The EUR/USD pair remained in a tight range on Tuesday as traders waited for the upcoming ECB decision. On the 4H chart, the pair remains below the lower side of the bearish flag pattern that formed a few weeks ago. It also remained slightly below the 50-period moving average while the Relative Strength Index (RSI) and the Stochastic Oscillator have pointed downwards.
Therefore, the pair will likely remain in the current range and then have a bearish breakout later this week after the ECB decision. If this happens, the next point to watch will be at 1.0800.
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