Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1150.
- Add a stop-loss at 1.1300.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1240 and a take-profit at 1.1320.
- Add a stop-loss at 1.1180.
The euro was unchanged on Wednesday morning ahead of the upcoming European consumer inflation numbers. The EUR/USD price was trading at 1.1225, a few pips below this week’s high of 1.1275.
European inflation data ahead
The EUR/USD has had numerous catalysts this week. On Monday, the pair moved sideways after the US published another set of weak economic numbers from the US.
The data showed that the country’s manufacturing production dropped by 0.3% in June while the industrial production fell by 0.5%. Industrial production dropped by 0.43% on a YoY basis. These declines happened even as the cost of doing business fell and investments in clean energy and semiconductors jumped.
Another report showed that retail sales also dropped in June. The headline retail sales rose by 0.2% in June, lower than the median estimate of 0.5%. Sales dropped even as inflation dropped and consumer confidence jumped.
Retail sales are important numbers are crucial because they are good measures of consumer spending, the biggest part of the American economy. The US will publish the latest building permits and housing starts data.
The EUR/USD price will also react to the latest European consumer inflation data. Economists expect the data to show that the headline consumer price index (CPI) rose by 0.3% in June, leading to a 5.5% increase. Core inflation is expected to have risen by 0.3% MoM and 5.4% YoY.
If these numbers are accurate, it means that the bloc’s inflation is still above the ECB’s target of 2.0%. Therefore, there is a high likelihood that the European Central Bank (ECB) and the Federal Reserve will hike rates by 0.25%.
EUR/USD technical analysis
The EUR/USD exchange rate has remained in a consolidation phase in the past few days. It remains slightly above the 50-period moving average and the important support at 1.1095 (April high).
The Relative Strength Index (RSI) has moved from the extreme overbought level of 85 to the current 63. Further, the Stochastic Oscillator has moved below the neutral level of 50. It remains above the Ichimoku cloud.
Therefore, the pair could continue falling as sellers target the key support at 1.1095. The stop-loss of this trade will be at 1.1325.
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