Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0092.
- Add a stop-loss at 1.0400.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0350.
- Add a stop-loss at 1.0200.
The EUR/USD price continued pulling back on Monday as the focus shifted to the upcoming FOMC minutes. It dropped to a low of 1.0227, the lowest level since November 11. It has retreated by by over 2% as the US dollar rebounded.
Focus on the Federal Reserve
The EUR/USD exchange rate retreated on Monday and Tuesday morning as investors refocused on the Federal Reserve. The Fed will publish the closely watched minutes of the last meeting on Wednesday. These minutes will provide more information about the deliberations among Fed officials.
There will be no major economic data from the United States and the European Union on Tuesday. Therefore, the pair will react to the important statements from several Federal Reserve officials. Loretta Mester, Esther George, and James Bullard will deliver statements on Tuesday.
In previous statements, some of these speakers have been supportive of pivoting considering that inflation has started easing recently. On the other hand, James Bullard remained committed to higher interest rate hikes.
The statements by these Fed officials come a few days after the US published encouraging inflation data. These numbers showed that the headline inflation dropped from 8.3% in September to 7.7% in October.
The inflation picture improved on Monday as the price of crude oil slumped to the lowest level in ten months on Monday. Brent crashed to $87 while West Texas Intermediate (WTI) crashed after rumors that Saudi Arabia was considering boosting production ahead of Europe’s ban on Russian oil.
The other catalyst for the EUR/USD price will be a statement by Joachim Nagel, the head of German’s central bank. He will likely provide more information on what the European Central Bank will do in the next meetings. The pair will also react to the latest European consumer confidence and current account data.
EUR/USD forecast
The EUR/USD price retreated in the overnight session. As it pulled back, the pair moved below the 25-day and 50-day moving averages. It also dropped slightly below the important support at 1.0284, which was the neckline of the head and shoulders pattern.
The Relative Strength Index (RSI) dropped below 40. Therefore, the pair will likely continue falling as sellers target the next key support at 1.0092, the highest point on October 27. A move above the resistance level at 1.0290 will invalidate the bearish view.
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