Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0350.
- Add a stop-loss at 1.0580.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0625.
- Add a stop-loss at 1.0400.
The EUR/USD exchange rate tilted lower as the US dollar index (DXY) bounced back and stocks retreated. It dropped to 1.0485, which was lower than this week’s high of 1.0595. Focus now shifts to the upcoming European GDP numbers scheduled for Wednesday.
EU GDP data ahead
The EUR/USD price pulled back during the US session as the market reacted to a series of robust economic data from the United States. On Friday, data showed that the labor market was still strong despite the rising interest rates.
The American economy added over 283k jobs in November, which was higher than the median estimate of 200k. In the same period, the unemployment rate remained unchanged at 3.7% while wages jumped by 5.2% during the month.
The US dollar also rose after the strong US non-manufacturing PMI numbers were published on Monday. This report came a few hours after the WSJ published a report in which it predicted that interest rates will need to rise above 5% in 2023.
Most economists expect that the Fed will hike rates by 0.50% in December, bringing the year-to-date increase to 450 basis points. They also see the bank delivering several rate hikes in 2023.
On the positive side, inflation has shown signs of easing recently. The average gas price has dropped to the lowest level in more than a year as the price of crude oil has pulled back. West Texas Intermediate (WTI) droppe to $73.81 while Brent tumbled to $79.17. Similarly, natural gas prices have dropped recently.
The next key catalyst for the EUR/USD price will be the upcoming EU GDP data. Economists expect that the second estimate of the number will show that the economy expanded by 0.2% in Q3 leading to a year-on-year increase of 2.1%. The reading will not have a major impact on the pair.
EUR/USD forecast
The EUR/USD price pulled back during the American and Asian sessions. It dropped to a low of 1.0483, which was much lower than this week’s high of 1.0595. This price is at the middle line of the ascending regression channel. It has also moved slightly above the 25-day and 50-day moving averages while the Relative Strength Index has drifted lower.
Therefore, the pair will continue falling, with the next reference level being at 1.0363, which is at the lower side of the regression channel.
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