Bullish View
Buy the EUR/USD and set a take-profit at 1.1400.
Add a stop-loss at 1.1250.
Timeline: 1-2 days.
Bearish View
Set a sell-stop at 1.1300 and a take-profit at 1.1250.
Add a stop-loss at 1.1350.
The EUR/USD held steady on Monday morning as the market reflected on the relatively strong US inflation data. Investors are also preparing for what promises to be one of the most important weeks in the market this year as the Fed and the ECB publishes their decisions. It is trading at 1.1318, which is slightly above last Friday’s low of 1.1265.
Busy Week Ahead
The EUR/USD rose after the Bureau of Labor Statistics published strong inflation numbers on Friday. The data revealed that the headline inflation rose from 6.2% in October to 6.8% in November. This was the biggest increase in more than 50 years. The core inflation that excludes volatile food and energy prices rose to 4.9%.
These numbers were important since they seem to have invalidated the Federal Reserve’s claim that the current inflation pace was transitory. Also, they are notable because the US labor market is tightening. In the other week, data by the BLS showed that the country’s unemployment rate declined to a low of 4.2%. This was the lowest level since the pandemic started.
Therefore, the focus shifts to the upcoming Federal Reserve interest rate decision that is scheduled for later this week. Based on a previous statement by the Federal Reserve chair, most analysts expect that the bank will tighten more. It will do this by reducing the size of its asset purchases and possibly hinting that interest rates hikes will start in the coming year. Former Treasury Secretary, Larry Summers has called for the Fed to signal four rate hikes.
The EUR/USD will also react to the upcoming US retail sales numbers that will come out on Tuesday. The next key catalyst to watch will be the European Central Bank (ECB) decision that is scheduled for Thursday.
EUR/USD Forecast
The EUR/USD pair was little changed on Monday morning as investors waited for key events. It is trading at 1.1318, which is slightly above the 25-day and 50-day exponential moving averages (EMA). The price is also slightly above the 23.6% Fibonacci retracement level.
It has also formed a symmetrical triangle pattern. This pattern has a few days to go before it reaches its confluence zone. Therefore, there is a likelihood that the pair will remain in this range ahead of the US retail sales numbers and the Fed interest rate decision.
