Bearish View
Set a sell-stop at 1.1718 and a take-profit at 1.1600.
Add a stop-loss at 1.1800.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.1750 and a take-profit at 1.1850.
Add a stop-loss at 1.1700.
The EUR/USD declined sharply as investors reflected on the rising risks in the market and mixed economic data. The pair fell to a low of 1.1725, which was the lowest level since August 23rd.
German Election and Federal Reserve
The biggest catalyst for the EUR/USD this week will be the upcoming Federal Reserve interest rate decision that will happen on Wednesday. The decision comes at a time when data from the US have been relatively mixed. For example, data published last week showed that the US inflation eased slightly in August while retail sales rebounded.
Similarly, according to Michigan University, American consumer confidence remained at the lowest level in almost a decade. This happened as the number of Delta cases rose and some sectors of the economy showed some weakness.
Therefore, this week, the Federal Reserve is expected to leave the interest rate unchanged and provide guidance about quantitative easing (QE) program. Some analysts expect the bank to follow through its previous guidance of starting to taper asset purchases in the fourth quarter.
The EUR/USD will also react to the upcoming election in Germany. The election, which will happen on Sunday, is expected to replace Angela Merkel, who has been at the helm for 16 years. Therefore, her successor will likely have an impact on the biggest economy in the region.
Meanwhile, there will be key economic data scheduled this week. On Tuesday, the US will publish the latest housing starts and building permits numbers. The data will be followed by the latest US existing home sales scheduled for Wednesday. Markit will publish the latest flash Manufacturing and Services PMI on Thursday while the Ifo Institute will release the latest German business confidence numbers on Friday.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair declined to a low of 1.1725, which was the lowest level since August 24. The pair has moved below the 25-day and 15-day moving averages and below the key support level at 1.1768.
At the same time, the Relative Strength Index (RSI) is hovering slightly above the oversold level while the MACD has moved below the neutral level. Therefore, the pair will likely maintain the bearish trend as bears attempt to move below 1.1700. On the flip side, a move above 1.1770 will invalidate the bearish view.
