Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.1025.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0950 and a take-profit at 1.1025.
- Add a stop-loss at 1.0800.
The EUR/USD exchange rate continued its strong sell-off after the Federal Reserve published minutes of the last meeting. It retreated to a low of 1.0940, its lowest point since August 13, down by 2.45% from its highest point this year.
US inflation data ahead
The EUR/USD pair retreated after the Fed minutes showed that officials were mixed when determining whether to cut rates by 0.25% or 0.50%.
After rigorous debate, officials settled on a 0.50% cut because of jitters in the labor market, where the unemployment rate has remained above 4% in the past four months.
Recently, however, there have been concerns about whether the jumbo rate cut was a mistake after the US published strong jobs numbers. Data revealed that the economy created over 254k jobs in September, while the unemployment rate slipped to 4.1%.
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In an interview with Bloomberg, Larry Summers, a former Treasury official, said that the bank probably erred when it slashed rates by 0.50%.
Therefore, the implication of all this is that the Fed will not be as aggressive as initially thought. This means that it will likely deliver rate cuts in 0.25% levels. Another strong jobs report in November could also push the bank to avoid cutting in November.
The next key catalyst for the EUR/USD pair will be minutes from the last European Central Bank (ECB) meeting. In it, the bank decided to slash interest rates by 0.25%, and hinted that more were coming.
The ECB is in a more difficult place because, Germany, the biggest economy is going through an economic crisis. In a statement, economic minister, Robert Habeck, said that the country was going through the first two recession since early 2000s.
The other notable catalyst will be the upcoming US consumer inflation report. Economists expect the data to show that the headline CPI retreated to 2.3% in October, while core CPI dropped to 3.2%.
EUR/USD technical analysis
The EUR/USD pair has been in a strong bearish trend after forming a double-top chart pattern at 1.1200.
On the daily chart, it has dropped below the neckline at 1.1000. It also moved below the key support at 1.0980, its highest point on March 8. The pair also dropped below the 50-day and 25-day weighted moving averages.
The MACD indicator has moved below the zero line, while the Relative Strength Index (RSI) has continued falling. Therefore, the pair will likely continue falling as bears target the next point at 1.0800.
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