Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1060.
- Add a stop-loss at 1.1215.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1188 and a take-profit at 1.1265.
- Add a stop-loss at 1.1060.
The EUR/USD pair held steady after a report by the Conference Board showed that the US consumer confidence dipped sharply in September. It was trading at 1.1167, a few points below this month’s high of 1.1188.
US consumer confidence
The consumer confidence report is closely watched by Federal Reserve officials and economists because of the pivotal role that consumers play in the economy.
Consumer spending accounts for about 70% of the GDP. In most cases, highly confident consumers spend more money and vice versa.
According to the Conference Board, confidence dropped from 105.6 in August to 98.7 in September, missing analysts’ estimate of 103.9. Most of these consumers are concerned about the country’s labor market, which has softened substantially in the past few months.
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The pair also reacted to a warning by Moody’s, which warned about the country’s debt load. In a statement, the rating agency noted that the upcoming administration will grapple with widen budget deficits. This statement came a year after Moody’s announced a negative outlook for the sovereign debt profile.
Moody’s statement is notable since it is the only agency with the top rating for the US government. S&P Global and Fitch slashed their ratings in 2011 and 2023, respectively.
These statements came a week after the Federal Reserve slashed interest rates by 0.50% and hinted that more cuts were on the way.
Europe is also not doing well, as evidenced by the weak flash manufacturing and services PMIs. The report showed that the bloc’s manufacturing PMI dropped from 45.8 in August to 44.8 while the services PMI fell from 52.9 to 50.5.
Therefore, the European Central Bank will also likely continue cutting interest rates in the next few meetings.
EUR/USD technical analysis
The EUR/USD exchange rate has been in a tight range this week. It has remained slightly below the key resistance point at 1.1188, where it formed a double-top chart pattern, which is a bearish sign. The Relative Strength Index has also formed a bearish divergence pattern.
On the positive side, the pair has formed a cup and handle chart pattern. It has also remained above the 50-day Exponential Moving Average (EMA).
Therefore, the key level to watch will be at 1.1188. A move above the double-top point will invalidate the double-top pattern and point to more upside. The stop-loss of this view is 1.1100.
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