Bullish view
- Set a buy-stop at 1.095 and a take-profit at 1.1050.
- Add a stop-loss at 1.0900.
- Timeline: 1-2 days
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.1000.
The EUR/USD pair has been in a strong downward trend in the past two weeks as the US dollar index staged a strong comeback. It has dropped from the year-to-date high of 1.1215 to 1.0900, its lowest level since August 8.
US dollar index rally continues
The EUR/USD price action was mostly because of the rising US dollar index, which surged to $103.17, its highest level since August 15.
The greenback has surged because of the relatively strong economic numbers from the United States recently. Data from the Bureau of Labor Statistics (BLS) showed that the labor market improved in September.
The economy added 254k jobs, wage growth continued, while the unemployment rate dropped to 4.1% in September. The agency also revised its August payrolls higher, meaning that the labor market is doing well.
Data released last Thursday showed that the Consumer Price Index (CPI) retreated from 2.5% to 2.4% in September. Core inflation remained at 3.2%, higher than the expected drop to 3.1%.
Therefore, there are rising odds that the Federal Reserve will reduce the pace of its rate cuts. Before these numbers, the view among most analysts was that the bank would deliver 0.25% rate cuts in November and December.
Now, there are doubts about whether the Fed will implement these cuts since the economy is doing well. The US ten-year Government Bond yield rose from 3.6% in September to 4.08%, its highest point since July. Also, the 30-year bond yield rose to 4.41%, its highest level since July 30.
The next key EUR/USD news will be the upcoming French inflation report and the Eurozone’s industrial production data on Tuesday. These numbers will have a minimal impact on the next European Central Bank (ECB) decision.
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EUR/USD technical analysis
The EUR/USD exchange rate has drifted downwards in the past few days after forming a double-top pattern at 1.1200. It has dropped below the neckline at 1.1000, its lowest point on September 11.
The pair has moved below the 50-day moving average and 1.0980, its highest swing on March 8. Also, the Awesome Oscillator bars have remained in the red in the past eight consecutive days. The Stochastic RSI has moved to the oversold level.
Therefore, the pair will likely rebound and retest the resistance point at 1.100 since it has formed a small doji candlestick pattern.
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