Bullish View
Buy the EUR/USD and add a take-profit at 1.1465 (38.2% retracement).
Add a stop-loss at 1.1170.
Timeline: 1-2 days.
Bearish View
Set a sell-stop at 1.1200 and a take-profit at 1.1100.
Add a stop-loss at 1.1300.
The EUR/USD pair was little changed as concerns about the new Omicron variant of Covid eased. The pair also reacted mildly to the relatively strong US pending home sales numbers and Germany flash inflation data. It is trading at 1.1265, which is slightly below Friday’s high of 1.1345.
Eurozone Inflation Data
The EUR/USD pair wavered even after data from Europe showed that the bloc’s inflation was soaring. On Monday, data by Germany showed that the country’s headline consumer price index (CPI) rose to 6.0% in November. This was the highest level in more than a decade. It was also higher than the median estimate of 5.0%. Still, on a monthly basis, consumer prices actually dropped by 0.1%.
Other countries in Europe are seeing higher prices. On Monday, data from Spain showed that the headline CPI rose from 5.4% to 5.6%. Preliminary data from France and Italy have shown that prices are soaring.
Therefore, the pair will today react to the latest preliminary inflation numbers from the Eurozone. Economists polled by Reuters expect the data to show that the headline CPI rose from 4.1% in October to 4.5% in November.
Still, analysts believe that the European Central Bank (ECB) will maintain a dovish tone in the coming meetings. The bank believes that the current pace of inflation is transitory and that prices will start to normalize in the coming years.
The next key catalyst for the EUR/USD will be US consumer confidence and housing data. The Conference Board will publish the latest consumer confidence data. Economists expect the data to show that confidence fell from 113.8 in October to 110.9 in November as inflation concerns remain.
The US will also publish the house price index data. On Monday, data showed that pending home sales rebounded by 7% in October.
EUR/USD Forecast
The EUR/USD pair tilted lower in the American and Asian sessions as the fear of the Omicron virus eased. The pair is trading at 1.1260, which is slightly below the 23.6% Fibonacci retracement level. It is also between the middle and upper lines of the Bollinger Bands. It has also moved slightly below the standard pivot point.
Therefore, the pair will likely resume the bullish trend as investors attempt to buy the dips. If this happens, the next key level to watch is the 38.2% retracement level at 1.1465.
