Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0500.
- Add a stop-loss at 1.0725.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0650 and a take-profit at 1.0750.
- Add a stop-loss at 1.0550.
The EUR/USD exchange rate wavered on Thursday morning as the holiday mood continued. The pair was trading at 1.0623 where it has been in the past two weeks. This price remains about 3.27% above the lowest point this month.
US housing challenges
The only economic data from the US this week was on housing. On Tuesday, data published by S&P showed that the house price index declined sharply in November. Additional numbers released on Wednesday revealed that pending home sales dropped by 4% in November. It was the sixth straight month of decline.
And last week, further housing numbers showed that new and existing home sales also continued dropping. Demand for houses has dropped sharply in the past few months because of the soaring interest rates. After rising to 7%, mortgage rates have dropped to 5.66%.
There will be no major economic data from the European Union on Thursday. And the only data from the US will not have an impact on the pair. The Bureau of Labor Statistics will publish the latest initial jobless claims numbers. Economists expect the data to show that initial claims dropped to 225k last week.
The other important catalyst for the EUR/USD pair is the decision by China to end its Covid-19 restrictions. The country will end mandatory quarantines that have been in place since the pandemic started. While the move was positive, analysts had already priced it in their models.
Meanwhile, natural gas prices plunged, a positive sign that European and US inflation will continue easing. Prices dropped by more than 12% on Wednesday after a report said that January will be warmer than expected. Gas for January delivery dropped to $4.60 per million British thermal units. It has been dropping throughout the month.
EUR/USD forecast
The EUR/USD price has been in a consolidation phase in the past few days. It is hovering at the Woodie pivot point. This price is also along the lower side of the ascending channel pattern shown in lack. It is also at the 50-day and 25-day moving averages while the Relative Strength Index (RSI) dropped below the neutral point.
Therefore, the pair will likely have a bearish breakout as we head to the new year. If this happens, the next key support level to watch will be at 1.0500. A move above the resistance at 1.06670 will invalidate the bearish view.
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