Bearish View
- Set a sell-stop at 1.000 and a take-profit at 0.9850.
- Add a stop-loss at 1.0140.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.020 and a take-profit at 1.0243.
- Add a stop-loss at 0.9980.
The EUR/USD pair declined to the parity level after the latest strong consumer inflation data from the United States and Germany. It was the first time that the pair reached that parity level in more than 20 years. It is now trading at 1.0082, which is slightly above its lowest level this month.
US and Germany Inflation Data
The EUR/USD pair retreated to parity after Germany published its final inflation data for June. The data revealed that the country’s headline inflation rose by 7.6% on a year-on-year basis. This was the highest figure in years.
The same trend happened in other countries. In France, the headline consumer price index (CPI) rose by 5.8% in June while in Spain, it rose by 10.2%. All these numbers are significantly higher than the target set by the European Central Bank (ECB).
Unfortunately, European inflation could keep rising if Putin decides to stop flows of gas to the region. According to the FT, Brussels wants member states to turn down heating and compensate industries willing to cut use of gas. All these actions could lead to higher prices in the coming months.
Meanwhile, consumer inflation remained at elevated levels in the United States. Data showed that inflation in the US rose to a multi-decade high of 4.1% as the cost of most items rose. Gasoline prices jumped above $5 for the first time ever while rent jumped at the fastest rate in over four decades.
The implication is that the Federal Reserve will likely accelerate its pace of rate hikes. Before the inflation data was released, most analysts were expecting that the Fed will hike by either 0.50% and 0.75%. Now, many of them believe that the bank will hike by 100 basis points later this month.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair dropped to parity level on Wednesday and then quickly bounced back. On the 4H chart, the pair remains below the 25-day and 50-day moving averages. It has also formed a small double-bottom pattern.
The current price is slightly above the first support of the standard pivot points. Therefore, the pair will likely resume the bearish trend as sellers gain more confidence of the it being below 1.00. The next key level to watch will be the second support of the pivot point at 0.9850.
Ready to trade our free Forex signals? Here are the best Forex brokers to choose from.