Bullish View
Buy the EUR/USD and add a take-profit at 1.1900.
Add a stop-loss at 1.1785.
Timeline: 1-2 days.
Bearish View
Set a sell-stop at 1.1785 and a take-profit at 1.1700.
Add a stop-loss at 1.1850.
The EUR/USD pair wavered in the overnight session as traders reflected on the latest American inflation data. After initially falling to 1.1800, the pair bounced back to 1.1845.
Inflation Easing
Consumer inflation in the United States may have peaked. That was the takeaway from the country’s inflation numbers that came out on Tuesday.
According to the Labor Department, the headline Consumer Price Index (CPI) declined from 5.4% in July to 5.3% in August. The core CPI, which tracks inflation excluding the volatile food and energy products, declined from 4.3% to 4.0%.
These numbers, therefore, provide evidence that the Federal Reserve was likely right in its view that the recent surge in prices was temporary. Still, analysts believe that prices will remain at elevated levels in the coming months. For example, a report by a federation of small businesses said that more than 40% of them were considering boosting prices.
The next key mover for the EUR/USD will be the Eurozone wages and industrial production that will come out later today.
Economists expect the data to show that industrial production eased from 9.7% in June to 6.3% in July as companies continued to deal with the lingering supply shortages. Wages also likely rose in the second quarter as countries reopened. Still, the impact of these numbers on the pair will be relatively muted.
The pair will also react to the upcoming American retail sales numbers scheduled for Thursday. Analysts expect these numbers to show that sales declined in August because of the overall higher prices.
The final key catalyst for the pair this week will be the Eurozone inflation data scheduled for Friday. While this is an important number, its impact on the EUR/USD will be muted since Eurostat already published the preliminary figure.
EUR/USD Forecast
The 4H chart shows that the EUR/USD pair tilted upwards in the overnight session. The pair moved slightly above the standard pivot point. It also rose slightly above the 25-day moving average. Notably, it has also formed a small inverted head and shoulders pattern and is substantially below the lower line of the previous ascending channel.
Therefore, the pair will likely keep rising after the relatively weak American inflation data. As such, the next key level to watch will be the psychological level of 1.1900. However, a drop below 1.1800 will invalidate this view.
