Bullish View
Buy the EUR/USD and set a take-profit at 1.1716 (50% retracement).
Add a stop-loss at 1.1550.
Timeline: 1-2 days.
Bearish View
Set a sell-stop at 1.1550 and a take-profit at 1.1450.
Add a stop-loss at 1.1650.
The EUR/USD pair held steady in early trading as the market continued to reflect on the strong US retail sales and weak consumer sentiment data. The pair rose to 1.1600, which was higher than last week’s low of 1.1523.
US Retail Sales and Consumer Sentiment
The US published relatively strong retail sales on Friday. Data published by the Census Bureau showed that the headline sales jumped by 0.7% in September from August. This increase was better than the median estimate of -0.2%.
On a year-on-year basis, the sales rose by 13.9% in September. At the same time, data by the University of Michigan showed that the country’s consumer sentiment declined to 71.4 in September, the lowest level since 2011. This decline was partly because of the rising prices of goods, which consumers expect will rise by 4.8% in the coming year.
Notably, the US retail sales came a few days after the US published the relatively strong consumer prices data. The headline inflation rose from 5.3% to 5.4% in September while core sales rose by 4.0%. As such, it seems like consumers are continuing to spend even as prices remain relatively higher.
The EUR/USD will react to the ongoing earnings season. Last week, most companies that published their results beat the analyst forecasts. For example, on Friday, Goldman Sachs recorded strong results, boosted by its investment banking division. Other companies that recorded strong results were Bank of America, Morgan Stanley, and JP Morgan. This week, the key companies that will publish their results are Philip Morris, Netflix, and Johnson & Johnson.
Other key economic numbers that will move the EUR/USD will be the US building permits and housing starts numbers. Eurostat will also publish the latest Eurozone inflation data.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair formed a double-top pattern at 1.1523 last week. In price action analysis, this pattern is usually a bullish sign. The pair has also formed a bullish pennant pattern at the 23.6% Fibonacci retracement level.
Like a double-bottom, a bullish pennant pattern is usually a sign that the price will keep rising. It has also moved above the 25-period and 15-period moving averages. Therefore, there is a likelihood that the pair will keep rising as bulls target the 50% retracement level at 1.1716.
