Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0600.
- Add a stop-loss at 1.0768.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0735 and a take-profit at 1.0800.
- Add a stop-loss at 1.0650.
The EUR/USD exchange rate retreated to a multi-month low this week and then bounced back after the relatively strong European GDP and industrial production numbers. It retreated to a low of 1.0697 and rebounded to over 1.0727.
US retail sales data
The EUR/USD pair rebounded after the latest European industrial production report. According to Eurostat, the bloc’s industrial production rose by 2.6% on a MoM basis in December, higher than the median estimate of -0.2%. This increase translated to a YoY increase of 1.2%, which was a strong recovery from the previous month’s decline of 5.4%.
Another report confirmed that the view that the bloc narrowly avoided a recession in the last quarter. The economy remained unchanged on a QoQ basis and expanded by 0.1% from the same quarter in 2022.
Still, there are concerns that the bloc’s economy will not grow too fast this year. In a recent report, analysts at the IMF noted that Germany, the biggest economy in the bloc, will be the worst performer in the G7.
Therefore, there is a likelihood that the European Central Bank will cut rates earlier than the Federal Reserve. Besides, the recent US numbers shown that the economy is doing relatively well as inflation has remained above 3% and the jobless rate is at 3.7%.
Looking ahead, the next important data to watch will be the latest retail sales numbers. Economists polled by Reuters expect the numbers to show that the headline retail sales retreated by 0.2% in January after growing by 0.6% in December. Core sales are expected to come in at 0.2%, a retreat from the previous 0.4%.
The other important data to watch wull be the Philadelphia Fed and New York Empire State manufacturing indices.
EUR/USD technical analysis
The EUR/USD exchange rate retreated to a low of 1.0697 on Wednesday and then rebounded after the strong European industrial production data. It has retested the important resistance point at 1.0724, its lowest swing in December last year. The pair remains below the lower side of the bearish flag pattern and the Ichimoku cloud indicator.
Therefore, the outlook for the EUR/USD pair is bearish, with the next point to watch being at 1.0600. The stop-loss of this trade will be at 1.0767.
Ready to trade our free trading signals? We’ve made a list of the top 10 forex brokers in the world for you to check out.