EUR/USD Forex Signal: Inverted Head and Shoulders Forms

The pair will likely have a bullish breakout as bulls target the 50% retracement at 1.1717.

Bullish View

  • Buy the EUR/USD and set a take-profit at 1.1718.

  • Add a stop-loss at 1.1600.

  • Timeline: 1-2 days.

Bearish View

  • Set a sell-stop at 1.1617 and a take-profit at 1.1550.

  • Add a stop-loss at 1.1700.

The EUR/USD pair was little changed on Monday morning as investors refocused on the European Central Bank (ECB), which will have its meeting this week. The pair is trading at 1.1645, which is slightly below last week’s high of 1.1670.

ECB Decision in Focus

The biggest mover for the EUR/USD pair will be the upcoming ECB meeting. Economists expect that the bank will leave its interest rates unchanged during the meeting. However, with consumer prices rising in Europe, some analysts expect that the bank will sound a bit hawkish in regards to its quantitative easing program.

Recent numbers that were published on Thursday showed that the country’s headline consumer prices rose by 3.5% in September, the highest level in almost a decade. And there is a likelihood that this trend will continue as gas and oil prices surge.

The EUR/USD will likely have a calm day today. The most important numbers to watch will be the latest German business sentiment data. Economists expect the data to show that business climate declined from 98.8 in September to 97.8 in September. The current assessment is also expected to drop from 100.4 to 99.4 while business expectations are expected to drop from 97.3 to 96.4.

This decline will likely be because of the rising cost of doing business, parts shortage, and the supply logjam.

The next key data that will move the EUR/USD will be from the United States. On Tuesday, the Conference Board will release the latest consumer confidence data. Analysts expect the data to show that confidence declined from 109.3 to 108.8. The US will also publish the latest new home sales numbers that are expected to be better than in September.

EUR/USD Forecast

The four-hour chart shows that the EUR/USD has been in a tight range in the past few trading days. The pair is trading at 1.1645, which is between the channel at 1.1618 and 1.1668. It is also between the 23.6% and 38.2% Fibonacci retracement level. It is being supported by the 25-day and 50-day moving averages. It has also formed an inverted head and shoulders pattern, which is usually a bullish sign. Therefore, the pair will likely have a bullish breakout as bulls target the 50% retracement at 1.1717.

EUR/USD

Crispus Nyaga
Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.