Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0370.
- Add a stop-loss at 1.0477.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0467 and a take-profit at 1.0550.
- Add a stop-loss at 1.0400.
The EUR/USD pair is struggling after a series of bad economic data from Europe and the ongoing demand for the US dollar. The euro is trading at 1.0425, which is slightly below this week’s high of 1.0460.
Strong Dollar Demand
The EUR/USD pair has been struggling recently as investors reflect on the ongoing strength of the US dollar. The dollar index has jumped by double-digits this year as its demand remains at elevated levels.
This is happening as investors price in a recession due to the extremely hawkish Federal Reserve. The bank has already hiked interest rates by 150 basis points this year and hinted that the hikes will continue. Therefore, most analysts believe that a recession is imminent.
The EUR/USD pair has also dropped as worries about the state of the European economy continue. The economy is dealing with a number of challenges. For example, countries like Germany and Spain are dealing with high natural gas prices as Russia continues lowering its deliveries.
As a result, there are concerns about whether European companies will be able to compete with other firms from the US and Asia.
Data published recently have shed light on the current state of the European economy. On Friday, data revealed that the bloc’s consumer inflation surged to the highest level ever recorded. The same trend continued in the producer sector, where the PPI continued climbing.
Meanwhile, the German situation continued worsening. Data by the statistics agency showed that the country made its first monthly trade deficit in three decades. This happened as the volume of exports declined as imports jumped.
The next key data to watch on Tuesday will be the upcoming EU services and composite PMI numbers. The data is expected to show that the PMI remained above 50 even as companies suffered from higher costs of doing business.
EUR/USD Forecast
The four-hour chart shows that the pair formed a rising wedge in June this year. It then made a bearish breakout and is currently below the lower side of the wedge pattern. The pair has moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) is below the neutral point.
The pair also formed a small hammer pattern on Friday but the rebound faded at around 1.0475. Therefore, there is a possibility that the pair will continue falling as bears target last week’s low at 1.0367.
