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
Buy the EUR/USD pair and set a take-profit at 1.1300.
Add a stop-loss at 1.1150.
EUR/USD pair wavered on Monday as investors focused on the ongoing riots in France and the rising oil prices. It was trading at 1.1236 on Monday, a few points below this month’s high of 1.1266. It also reacted to a relatively dovish statement from Kevin Warsh, the Federal Reserve Chair.
Dovish Kevin Warsh and France Protests
The EUR/USD pair held steady last week as market participants reacted to the US consumer and producer inflation reports. A report by the Bureau of Labor Statistics (BLS) showed that the headline CPI rose 3.7% last month, moving from the Federal Reserve’s target of 2.0%. Core inflation, which excludes the volatile food and energy prices, rose 2.7%, also slightly higher than the expected 2.6%.
The producer price index also continued last month. Sadly, there are signs that inflation will continue rising this month, with Brent and the West Texas Intermediate (WTI) rose to $110 and $101. As a result, the average gasoline and diesel prices have jumped to $4.3 and $6.32, respectively. These numbers mean that inflation will remain above the 2% target for months.
Despite this trend, Kevin Warsh, the Federal Reserve hinted that the bank will not be in a hurry to hike interest rates later this month. Analysts are now pricing in a rate hike in December, especially if the labor market improves. A report released earlier this month showed that the economy created 29,000 jobs last month.
The EUR/USD pair will have no major macro data this week. Some of the top catalysts to watch will be a statement from Christine Lagarde on Wednesday and flash manufacturing and services PMI data. At the same time, traders will react to the ongoing protests in France, where students are protesting underfunded education and rising inflation.
EUR/USD Technical Analysis
The EUR/USD pair has held steady in the past few days, moving from a low of 1.1112 on October 14 to the current 1.1236. It has moved above the upper side of the descending channel that connects the key levels since October 1.
The pair has moved slightly above the 50-period Exponential Moving Average (EMA). At the same time, the pair has remained slightly above the Supertrend indicator, which is a bullish sign in technical analysis.
Therefore, the pair will likely remain in a tight range in the coming days. A pullback may see it drop to the key support level of 1.1150. On the other hand, a move above the resistance at 1.1266 will invalidate the bearish outlook.
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