Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.1250.
- Add a stop-loss at 1.1425.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.1355 and a take-profit at 1.1420.
- Add a stop-loss at 1.1300.
The EUR/USD pair attempted to stage a comeback as US bond yields retreated. The pair is trading at 1.1347, which is still more than 1% below the highest level this week.
Eurozone Inflation Data Ahead
The EUR/USD pair has had a difficult period this week as investors focus on the rising bond yields. On Tuesday, the 10-year US government bond jumped to the highest level in two years. The jump in yields came at a time when investors are worried about the Federal Reserve, which has committed to tighten this year.
On Wednesday, European government bonds also jumped. The most important one was the benchmark German 10-year bund, whose yield rose above 0% for the first time since 2019. Bond yields in other countries like Italy and Spain also rose.
The German bond sell-off came shortly after the country’s statistics office published the latest inflation data. The numbers revealed that the German inflation rose to over 5% in December last year.
The EUR/USD will react mildly to the December Eurozone consumer inflation data that will come out during the European session. Economists expect the data to reveal that the bloc’s inflation rose to 0.4% on a month-on-month basis and by 5.4% on a YoY basis.
These numbers will likely have no major impact on the EUR/USD pair because the provisional ones were already released three weeks ago. Historically, the final reading does not have a major discrepancy from the provisional one.
The EUR/USD will also be affected by the latest economic data from the US. The country will publish the latest existing home sales numbers. These data will come out a day after the country published strong building permits and housing starts numbers. The US will also release the latest initial jobless claims data.
EUR/USD Forecast
The chart below shows that the EUR/USD price has been in a strong bearish trend in the past few days. It dropped from a high of 1.1487 to a low of 1.1320. Now, it is attempting to bounce back. However, a closer look shows that the pair is forming what looks like a bearish flag pattern. In price action analysis, this is usually a bearish sign.
The 25-period and 50-period moving averages are also about to form a bearish crossover pattern. Therefore, there is a likelihood that the pair will have a bearish pullback today.
