Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0000.
- Add a stop-loss at 0.9700.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 0.9800 and a take-profit at 0.9700.
- Add a stop-loss at 1.000.
The EUR/USD price drifted higher on Wednesday morning as investors focused on the falling volatility and the upcoming European inflation data. It rose to a high of 0.9850, which was higher than this week’s low of 0.9633.
EU inflation and US housing data
The EUR/USD price rose slightly as risks in the financial market appeared to ease. American stocks continued rebounding, with the Dow Jones rising by more than 500 points. At the same time, the VIX index, which is the best measure of volatility, declined for the second straight day.
The next key catalyst for the pair will be the upcoming European consumer inflation data. Economists expect the data to show that the headline consumer inflation rose from 9.1% to 10%. On a MoM basis, analysts expect that inflation rose from 0.6% to 1.2%.
Core inflation, on the other hand, is expected to have risen from 4.3% to 4.8% on a YoY basis. While these numbers are important, their impact on the pair will be minimal for two main reasons. First, they will likely be in line with the preliminary numbers that were published three weeks ago.
Second, the European Central Bank (ECB) has already committed to continue tightening in the coming months. Analysts expect another 0.75% hike when it meets next week.
The other catalyst for the EUR/USD pair will be the upcoming mortgage, housing starts, and building permits data. With mortgage rates rising, analysts expect the data to show that housing starts dropped to 1.475 million while building permits fell to 1.53 million. These numbers have been falling in the past few months.
The pair will also react to Fed’s Beige Book that will come out in the American session. The report, which is published eight times per year, will provide more information from Fed officials.
EUR/USD forecast
The EUR/USD pair has been moving sideways in the past few days. It is trading at 0.9850, which is an important level since it was its lowest level on September 6. The pair has moved above the 25-day moving average while the Relative Strength Index (RSI) is rising.
It has also formed a small cup and handle pattern and a bullish flag. Therefore, there is a possibility that it will bounce back as buyers target the parity level at 1.00.
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