Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0450.
- Add a stop-loss at 1.0615.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0585 and a take-profit at 1.0650.
- Add a stop-los at 1.0500.
The EUR/USD continued its consolidation mode as investors waited for the upcoming US and German consumer inflation data. The pair is also ranging after the Bundesbank president pressed the European Central Bank (ECB) to start moving in its July meeting.
US and German Inflation Data
Inflation in the US and the European Union has been in a strong upward trend in the past few months. In March, inflation in the two regions soared to the highest level in decades as energy costs surged.
Therefore, investors will focus on the latest inflation numbers that will be published today. Economists expect the data to show that the headline consumer price index (CPI) rose from 7.3% in March to 7.4% in April. On a month-on-month basis, they expect that inflation dropped from 2.5% to 0.8%.
Meanwhile, in the United States, analysts expect that the monthly CPI and core CPI declined to 0.2% and 0.4%. The year-on-year inflation is expected to have declined to 8.1% and 6.0%, respectively.
If analysts are accurate, these numbers will send a signal that the European and American inflation is reaching its peak. In fact, a quick look at the commodities market shows that most of them have started to stabilize in the past few weeks. Copper has dropped to the lowest level in eight months while crude oil and natural gas prices have stabilized recently.
The EUR/USD pair will react to a statement by Christine Lagarde, the European Central Bank president. There is a likelihood that she will talk about the bank’s plans going ahead. Her speech will come a day after the German Buba president made the case for rate hikes. In a statement, he said that the bank should start hiking interest rates in July to deal with inflation.
EUR/USD Forecast
The EUR/USD continued its consolidation ahead of the important inflation data. On the four-hour chart, the pair has formed a bearish flag pattern that is shown in yellow. The price is slightly below the middle line of the Donchian Channels while the True Strength Oscillator has moved to the neutral point.
Therefore, because of the bearish flag pattern, there is a possibility that the pair will continue the bearish trend that paused last week. More downsides will be confirmed if the price manages to move below the lower side of the channel at 1.0515.
