Bullish View
- Buy the EUR/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1350.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.1400 and a take-profit at 1.1350.
- Add a stop-loss at 1.1450.
The EUR/USD pair wavered in the overnight session as investors continued to assess the impact of the hawkish Fed and ECB on the respective currencies. The pair is trading at 1.1417, which is about 0.56% below the highest level last week.
ECB and Fed Decisions
The US and the Eurozone have not published any important economic data this week. Therefore, the pair has moved sideways as investors digest the decisions by the Fed and ECB. Two weeks ago, the Fed decided to leave rates unchanged and signalled that it will start hiking rates in March.
On Thursday last week, the ECB also left its pandemic-era policies unchanged. But in a press conference, Christine Lagarde refused to rule out whether the bank will start hiking interest rates later this year. Investors interpreted this to be a sign that the bank will hike rates.
She confirmed this view on Monday when she pointed that any rate hike cycle will be gradual. Analysts expect that the bank will implement about 2 hikes later this year.
On Tuesday, the US published its trade numbers. According to the Commerce Department, the country’s exports rose by $4 billion to $228 billion. In the same time, imports also increased by $4 billion to $308 billion. As a result, the country’s total trade deficit widened to more than $80.7 billion.
Later on Wednesday, the German statistics agency will publish the latest trade numbers. Analysts expect that the country’s exports declined by 0.2% in December while imports fell by 1.5%. They see the trade deficit narrowing to about 10.4 billion euros.
The next key catalyst that will move the EUR/USD pair will be the latest American consumer price index data that will come out on Thursday.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair jumped sharply after the ECB decision last week. It managed to rise to a multi-week high of 1.1482. Along the way, the pair has formed a bullish flag pattern that is shown in red. It also remained above the 25-day and 50-day moving averages while the RSI has retreated slightly.
The pair is also forming the handle section of the cup and handle pattern. Therefore, there is a possibility that the pair will keep rising, with the initial target being last week’s high of 1.1482.
