Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0700.
- Add a stop-loss at 1.0825.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0800 and a take-profit at 1.0850.
- Add a stop-loss at 1.0750.
The EUR/USD pair remained in a consolidation phase on Tuesday ahead of the upcoming US consumer inflation numbers. The pair was trading at 1.0780, a few points above last week’s low of 1.0723. It has risen as the US dollar index continued rising.
US inflation data ahead
The EUR/USD exchange rate moved sideways as concerns about the German economy continued. Recent economic numbers have shown that the economy is on the verge of contracting again this year. Industrial production has dropped in the past six months while the manufacturing PMI number has remained below 50 for months.
This is important because Germany was the biggest economy to contract in 2023 as many industrial companies lost their competitive advantage because of competition and higher energy prices. These numbers are important because Germany is the biggest economy in Europe.
The European Commission will publish the latest economic forecasts on Tuesday. These numbers will be followed by the upcoming fourth-quarter GDP report scheduled for Wednesday. Based on the first estimate, economists expect the report to show that the economy was flat in Q4. Further data will likely show that industrial production dropped by 0.2% in December.
This performance means that the European Central Bank (ECB) will continue being under pressure to cut interest rates earlier than the Fed. Besides, the bloc’s inflation figures are much lower than those in the United States.
The main EUR/USD news will be the upcoming US inflation data on Tuesday. The report will likely show that inflation remained high in January as housing costs jumped. Economists predict that the headline inflation rose by 2.9% in January while core inflation rose by 3.8%.
These numbers will have an impact on the pair because the Fed has pledged to be data-dependent when making its next interest rate decision. A strong inflation report means that the Fed will have more room to wait before starting to cut rates.
EUR/USD technical analysis
The EUR/USD exchange rate has moved upwards since February 6th. In this period, the pair has constantly remained below the 50-period moving average and formed a bearish flag pattern, which is shown in purple. This is one of the most popular bearish patterns in the market.
The MACD indicator has moved to the neutral point. Therefore, the outlook for the pair is bearish, with the next key point to watch being at 1.0700. Besides, the US dollar index has formed an inverse head and shoulders pattern on the daily chart.
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