Bearish View
Set a sell-stop at 1.1250 and a take-profit at 1.1180.
Add a stop-loss at 1.1330.
Timeline: 1 day.
Bullish View
Set a buy-stop at 1.1300 and a take-profit at 1.1400.
Add a stop-loss at 1.1200.
The EUR/USD pair was little changed ahead of the latest US retail sales numbers and the upcoming Federal Reserve interest rate decision. The pair also retreated after the relatively weak Germany GDP estimates by the ifo Institute. It is trading at 1.1280, where it has been in the past few days.
US Retail Sales and Fed Decision
The biggest focus among investors is the upcoming interest rate decisions by the Federal Reserve and the European Central Bank (ECB). The Fed will conclude its monetary policy meeting later today.
Based on the recent economic data, analysts expect that the bank will tighten its monetary conditions more. It could achieve this by reducing the size of the asset purchases by about $30 billion. The goal of doing this will be to end the purchases in the first quarter of 2022.
The Fed will also signal its willingness to hike interest rates in the coming months. The pace of rate hikes will be gradual to prevent shocks in the market.
Analysts expect that tightening will happen because of the relatively strong economic numbers from the US. For example, early this month, data by the Bureau of Labor Statistics (BLS) showed that the US unemployment rate dropped to 4.2%. This was the lowest level since the pandemic started.
Additional data released this month showed that the country’s inflation is still rising. Prices have moved from less than 2% early this year to 6.8%. A closer look at individual products show that prices have risen above that. For example, gasoline prices have risen by double-digits this year. Food and home prices have risen by double-digits as well.
The EUR/USD will also react to the latest US retail sales numbers that will come out later today. The numbers are expected to show that prices retreated slightly in November as prices rose. After the Fed decision, focus will shift to the upcoming ECB decision.
EUR/USD Forecast
The EUR/USD has been in a tight range in the past few days as investors wait for the latest Fed and ECB interest rate decision. The pair is trading at 1.1275, which is slightly below than last week’s high of 1.1350. It has formed a triangle pattern and is slightly below the 25-day moving average while the Relative Strength Index (RSI) has moved to the neutral level of 43. Therefore, the pair will likely break out lower ahead of the FOMC decision.
