Bearish View
- Set a sell-stop at 1.1287 and a take-profit at 1.1200.
- Add a stop-loss at 1.1335.
- Timeline: 2 days.
Bullish View
- Set a buy-stop at 1.1315 and a take-profit at 1.1400.
- Add a stop-loss at 1.1250.
The EUR/USD pair retreated slightly as investors rushed to the safety of the US dollar amid the rising geopolitical risks. It is trading at 1.1300, which is lower than Wednesday’s high of 1.1360.
Russia-Ukraine Crisis
The EUR/USD erased all gains it made on Wednesday as investors reacted to the ongoing tensions on Ukraine. The sharp decline happened after the country announced several cyberattacks of its key government websites and those of banks.
Therefore, analysts believe that this wave of cyber attacks will spread to other countries that have sanctioned Russia for invading Ukraine. For example, some of the most recent attacks in the US were on the Colonial Pipeline and SolarWinds.
An escalation of sanctions will lead to more geopolitical tensions, which makes the US dollar more attractive because of its safe-haven qualities. Indeed, the decline of the EUR/USD pair happened as stock indices like the S&P 500 and Nasdaq 100 declined while gold rose.
On Wednesday, Europe published its January inflation data that confirmed prices were indeed rising. According to Eurostat, the headline consumer price index rose by 5.1% on a year-on-year basis as energy prices rose. The core CPI, which excludes the volatile food and energy prices, declined from 2.6% to 2.3%. On a month-on-month basis, the core CPI dropped by 0.9%.
The US will publish important economic numbers that will provide investors with a feel of the state of the American economy. For example, the initial jobless claims data will show the strength of the country’s labor market. Analysts expect that the number of people filing these claims dropped to 235k.
The other important data that will come out on Thursday are new home sales and the second revision of US GDP.
EUR/USD Forecast
The EUR/USD pair declined to a low of 1.1300 as risks rose. On the three-hour chart, the pair has moved below the 25-day and 50-day exponential moving averages (EMA). It has also moved to the 50% Fibonacci retracement level. It remains below the descending trendline shown in blue and slightly above the key support level at 1.1287.
Therefore, the pair will likely have a bearish breakout, which will be confirmed if it moves below the support at 1.1287. If this happens, the next key level to watch will be at the psychological level at 1.1200.
