Bearish View
- Set a sell-stop at 1.1700 and a take-profit at 1.1600.
- Add a stop-loss at 1.1750.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.1750 and a take-profit at 1.1800.
- Add a stop-loss at 1.1700.
The EUR/USD pair crawled back in the overnight session as focus remained on the Federal Reserve. The pair is trading at 1.1730, which is slightly above yesterday’s low of 1.1700.
Global Worries Remain
The EUR/USD pair declined sharply on Monday as the market worried about the new risks. The biggest risk was the impending collapse of Evergrande, the second-biggest real estate company from China. The company has already hired reorganization experts as its debts fall due. As such, investors are generally worried about contagion because of the systemic importance of the company.
Investors were also worried about the fiscal health of the United States. Joe Biden faces a significant challenge securing the senate votes he needs to avoid a government shutdown.
In a statement in the Wall Street Journal, Janet Yellen warned that failing to raise the debt ceiling will lead to a major avoidable financial crisis. For one, it will lead to a credit rate downgrade and a potential default of the American government. The situation is worrisome considering that Biden needs 60 votes in the senate to raise the ceiling.
The EUR/USD also declined because of the ongoing power crisis in Europe as the price of natural gas rose. There are concerns that the region will see higher power costs as the winter season approaches.
Looking ahead, the key mover for the pair this week will be the Federal Reserve interest rate decision. The bank is expected to leave interest rates unchanged at the range of 0.0% and 0.25%. The bank is also expected to make a decision on quantitative easing (QE). There are signs that it will hint at possible tapering in the fourth quarter.
Later today, the Riksbank, the world’s oldest central bak will deliver its rate decision while the US will publish the latest housing starts and building permits data.
EUR/USD Technical Analysis
The EUR/USD pair declined sharply on Monday but it pared back some of the losses in the evening session. The pair is trading at 1.1730, which was slightly above the lowest level on Monday. It remains slightly below the 25-day moving average and the double-top pattern at 1.1910.
It is also below the Ichimoku cloud while the Relative Strength Index (RSI) has also been in a bearish trend. Therefore, the pair will likely remain under pressure as investors target the key support at 1.1650.
