Bearish View
Sell the EUR/USD pair and set a take-profit at 1.1200.
Add a stop-loss at 1.1400.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.1310 and a take-profit at 1.1400.
Add a stop-loss at 1.1250.
The EUR/USD pair tilted upwards on Tuesday morning even as concerns about the Omicron variant remained. The pair rose to a high of 1.1300, which was relatively higher than last week’s low of 1.1235.
Omicron Variant Concerns
There are significant concerns about the Omicron variant as the number of cases has continued rising in Europe and the United States. Germany confirmed more than 38,000 new cases on Monday while France recorded more than 48,000. These numbers are the highest daily increases in the past few months.
As a result, European countries are actively considering new measures to curb the spread. For example, the Netherlands has already announced a nationwide lockdown that puts limits on non-essential businesses and travel.
In Germany, the government announced new limits on travellers from the UK. These travellers will need to have a negative Covid-19 test and then stay in quarantine for about ten days. France has also applied similar rules for travellers from the UK. They must self-isolate and have a negative test.
Therefore, analysts believe that the variant will affect the overall recovery of the American and European economies. This explains why US and European stocks retreated on Monday. In the US, the Dow Jones and Nasdaq 100 index declined by more than 600 and 220 points respectively. Similarly, in Europe, the DAX, CAC 40, and Stoxx 50 declined by more than 1%.
The EUR/USD is also rising as investors buy the dip following last week’s central bank decisions by the Federal Reserve and the European Central Bank (ECB). The two central banks decided to leave interest rates unchanged. But they offered different guidance, with the Fed hinting that there will be three rate hikes in 2022. The ECB believes that rates could remain at the current level in the coming year.
EUR/USD Forecast
The EUR/USD pair declined to a low of 1.1235 last week after the ECB and Fed decisions. The pair then erased these losses in on Monday and Tuesday morning and is currently trading at 1.1300.
The four-hour chart shows that the pair has formed a rectangle pattern. It is currently slightly above the lower side of this channel. The Relative Strength Index (RSI) has moved to the neutral level of 50 while the Stochastic Oscillator has moved slightly above the oversold level. It is also slightly above the standard pivot point.
Therefore, there is a likelihood that the pair will resume the downward trend as the fears of the Omicron variant remain.
