Bullish view
- Set a buy-stop at 1.0875 and a take-profit at 1.0950.
- Add a stop-loss at 1.0800.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0850 and a take-profit at 1.0800.
- Add a stop-loss at 1.0935.
The EUR/USD exchange rate reacted mildly to last week’s ECB decision, US GDP and December’s PCE report. The pair remained at the crucial support point at 1.0850 on Monday morning ahead of the upcoming European GDP report and Federal Reserve interest rate decision.
Federal Reserve decision ahead
The EUR/USD had an eventful week as investors reacted to several important events. The European Central Bank (ECB) delivered its first interest rate decision of the year and did what most analysts were expected. It left rates unchanged at 4% and hinted that it will hold them steady for a while.
However, there are signs that ECB officials have mixed opinions of what to expect in the coming months. In an interview on Saturday, Fancois Villeroy Galhau, the head of the French central bank, said that the bank could consider loosening monetary policy in the next meeting. This view differed with what Christine Lagarde said in her press conference after the meeting.
The EUR/USD pair also reacted to the latest US GDP data. According to the statistics agency, the American economy expanded by 3.3% in the fourth quarter of the year. This increase was better than the median estimate of 2.0%. It is a sign that the American ecoomy is doing well, helped by strong consumer and government spending.
The US also published encouraging PCE report. The figure showed that the PCE report, which is the Fed’s favorite inflation gauge, retreated to 2.9% in December. This is notable since the PCE is inflation that is adjusted to inflation and is the most important inflation gauge by the Fed.
The next key EUR/USD news to watch will be the upcoming EU GDP report scheduled for Tuesday. In the US, the Conference Board will publish the latest consumer confidence report followed by the Fed decision on Wednesday.
EUR/USD technical analysis
The EUR/USD exchange rate has moved sideways in the past few days as focus now shifts to the upcoming Fed decision. The pair has moved slightly below the key support at 1.0877, its lowest swing on January 5th. It is also consolidating at the 50-period and 25-period Arnaud Legoux Moving Averages (ALMA).
The pair has moved slightly above the 50% Fibonacci Retracement point. It has also formed a broadening wedge pattern. Therefore, the pair will likely remain in this range this week, with the support and resistance points to watch being at 1.0813 and 1.0933.
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