Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0500.
- Add a stop-loss at 1.0800.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0685 and a take-profit at 1.0750.
- Add a stop-loss at 1.0550.
The EUR/USD currency pair drifted downwards on Tuesday morning as investors started positioning for the new year. It dropped to a low of 1.0670, which was the lowest point since December 29. It has been in this range in the past few weeks.
German Inflation and US NFP Data
The EUR/USD has been in a tight range in the past few days as investors reflect on recent economic data. Numbers published in December revealed that America’s inflation eased to 7.3% in November while the unemployment rate remained unchanged at 7.3%. Additional data revealed that the American economy expanded at a faster pace in Q3.
Meanwhile, in Europe, the economy remained under pressure as inflation stayed above 10% as energy prices remained at an elevated level. Analysts expect that the European economic condition will take a longer period to recover than in the US.
Data published on Monday by S&P showed that manufacturing activity in the region contracted in December. In Germany, manufacturing PMI dropped to 47.1 in December while in the European Union, it rose to 47.8. A PMI reading below 50 is a sign that a sector is deteriorating.
The next main catalyst for the EUR/USD will be the latest German inflation and employment numbers scheduled for Tuesday. Analysts expect that the country’s consumer price index (CPI) dropped to 9.1% in December while the harmonized figure retreated to 10.7%. These numbers are still substantially above the target of the European Central Bank.
Economists also expect that the German unemployment rate remained at 5.6% in December as the economy created over 15k jobs.
The other important events this week will be the latest FOMC minutes scheduled for Wednesday. The report will shed more color on what the bank’s official’s deliberated on in the December meeting. Finally, the US will publish the latest jobs report on Friday.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair has been in a tight range recently. It has remained slightly above the lower side of the ascending channel shown in black. It has moved slightly above the 25-day and 50-day moving averages. The MACD has moved above the neutral point while the Relative Strength Index (RSI) moved below the neutral point.
Therefore, the outlook of the pair is neutral with a bearish bias. The bearish view will be confirmed if it moves below the lower side of the channel. If this happens, the next key support point to watch will be at 1.0500.
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