Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1850.
- Add a stop-loss at 1.1650.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1650.
- Add a stop-loss at 1.1850.
The EUR/USD exchange rate continued rising, reaching its highest level since October 1 as traders waited for the upcoming European Central Bank (ECB) interest rate decision and the key numbers from the United States. It rose to a high of 1.1750, much higher than the November low of 1.1470.
ECB Interest Rate Decision and US Macro Data
The EUR/USD exchange rate continued rising as market participants waited for the upcoming ECB interest rate decision, which will happen on Thursday.
Economists polled by Reuters and Polymarket data show that the bank will maintain interest rates unchanged at 2% as it has largely achieved its inflation goals.
A recent report showed that the headline Consumer Price Index (CPI) rose slightly to 2.2% in November. The core CPI, which excludes food, energy, and tobacco, was unchanged at 2.4%.
The ECB interest rate decision itself will no move the EUR/USD pair as investors have already priced in what to expect. Therefore, the main catalyst will be the guidance on what to expect in the coming meetings.
There are divisions among analysts on what to expect in the coming meetings. Some analysts believe that the bank will cut interest rates in the March meeting, while other officials expect the next move to be a hike, possibly in the October meeting.
The EUR/USD pair will react to several important catalysts from the United States, including that upcoming non-farm payrolls (NFP) data, which will come out later today. Economists expect the report to show that the economy added 55k jobs in October.
However, the report may also come out negative as many government workers who took deferred resignation fell from payrolls on September 30.
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The other important data to watch will be the upcoming retail sales data from the Commerce Department, which will provide more information on the state of the economy.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD pair has been in a strong uptrend in the past few weeks, rising from a low of 1.1468 in November to a high of 1.1765, its highest level since October.
The pair has formed an inverse head and shoulders pattern, a common bullish reversal chart pattern. It has moved above the 50-day and 100-day Exponential Moving Averages (EMA) and the Supertrend indicators.
The Relative Strength Index (RSI) and the MACD indicators have continued to rise, a sign that it is gaining momentum. Therefore, the pair will likely keep rising as buyers target the next key resistance level at 1.1850.
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