Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.2000.
- Add a stop-loss at 1.1700.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1700.
- Add a stop-loss at 1.2000.
The EUR/USD exchange rate remained under pressure on Wednesday morning as traders waited for the upcoming European inflation data and ECB interest rates decision. It retreated to a low of 1.1812, down sharply from the year-to-date high of 1.2080.
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European Inflation Data and ECB Decision Ahead
The EUR/USD pair retreated as traders waited for the upcoming European consumer inflation report, which will come out later today. Economists polled by Reuters expect the data to show that the headline Consumer Price Index (CPI) dropped from 1.9% in December to 1.7% in January.
Core inflation, which excludes the volatile food and energy prices, is expected to drop to 2.2% in January from the previous 2.3%. Additionally, the Producer Price Index (PPI) is expected to move to minus 2.3% from the previous minus 1.7%.
These numbers will confirm that the European Central Bank has achieved its inflation goal. As a result, analysts believe that the bank will leave interest rates unchanged at 2% on Thursday.
Most importantly, a recent survey showed that most economists expect that the central bank will leave interest rates unchanged for the rest for the year.
At the same time, another survey showed that the Federal Reserve will deliver at least two interest rates cuts this year as inflation is moving close to the target of 2.0%.
The next important catalyst for the EUR/USD pair will be the ADP private sector jobs numbers. Economists expect the report to show that the economy added 48,000 jobs in December after adding 41k in the previous month. This will be an important report as the Bureau of Labor Statistics will not publish the official jobs report on Friday because of the government shutdown.
EUR/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD exchange rate has pulled back in the past few weeks, moving from a high of 1.2080 to the current 1.1797.
The pair has retreated to a crucial level since it was the highest swing on December 24. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA).
Therefore, the most likely scenario is where the pair rebounds as bulls target the year-to-date high of 1.2080. A drop below the 50-day moving average at 1.1735 will invalidate the bullish outlook.
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