Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0760.
- Add a stop-loss at 1.0940.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0895 and a take-profit at 1.0950.
- Add a stop-loss at 1.0750.
The EUR/USD price pulled back slightly after the relatively weak German economic data. It retreated to a low of 1.086, which is where it has been in the past few days. This price is a few points below this year’s high of 1.0933.
ECB and Fed decisions
The main focus among investors is the upcoming Fed and ECB decisions scheduled for Wednesday and Thursday, respectively. Being the first decisions of the year, these meetings will set the tone for what to expect in the coming months.
The US dollar has rebounded slightly ahead of the two meetings, with the dollar index rising by 0.21% to $101.93. At the same time, American stocks pulled back, with the Dow Jones and Nasdaq 100 indices falling 0.35% and 1.45%, respectively.
Bond yields have gained, with the 10-year and 5-year yields rising to 3.55% and 3.67%, respectively. This is likely a reflection that the market expects that the Fed will sound a bit hawkish in this meeting. The bank has the motivation to be hawkish since the market has gotten ahead of its views, with some analysts suggesting that the bank will cut rates later this year.
The EUR/USD price will react to the upcoming American consumer confidence data by the Conference Board. Economists expect that confidence among consumers rose from 108.3 in December to 109 in January. Confidence has been rising recently because of the falling inflation.
Other important numbers will be from Europe. Eurostat, the bloc’s statistics agency, will publish the latest GDP data. In its first estimate of the quarter, they expect that the economy contracted by 0.1% in Q4. On Monday, data from Germany showed that the economy contracted in Q4 as inflation rose. The pair will also react to the latest German inflation data.
EUR/USD forecast
The EUR/USD price has been in a consolidation phase in the past few days. This wavering has seen it consolidate to the 25-day and 50-day moving averages. It is also stuck at the lower side of the rising wedge pattern. The Relative Strength Index (RSI) has formed a bearish divergent pattern.
Therefore, the pair will likely have a bearish breakout in the near term. This outlook could see it retest the support at 1.0765, the lowest point on January 18.
