Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.100.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0915 and a take-profit at 1.1000.
- Add a stop-loss at 1.0800.
The EUR/USD exchange rate continued its strong downward trend ahead of the upcoming US retail sales data and European Central Bank (ECB) decision. The pair retreated to a low of 1.0900, its lowest swing since August 8. It has retreated by over 2.8% from its highest point this year as the US dollar index (DXY) rose to $103.03.
European Central Bank Decision Ahead
The EUR/USD pair retreated ahead of the upcoming inflation data from France and Spain. Economists polled by Reuters expect the data to show that the French headline Consumer Price Index (CPI) retreated from 0.5% in August to minus 1.2% in September.
In Spain, the CPI is expected to move from 0.0% to minus 0.6%. On a YoY basis, the French and Spanish CPI is expected to move to 1.2% and 1.5%, respectively. These numbers mean that the bloc’s inflation has moved below the ECB’s target of 2.0%.
The other important data to watch will be the upcoming Eurozone industrial production and economic sentiment data. Analysts expect the production dropped by 1.2% in August.
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Therefore, there are rising odds that the European Central Bank (ECB) will continue cutting rates since the labor market has softened. Analysts see the bank delivering a 0.25% cut in its meeting on Thursday.
The other important macro data to watch this week will be US retail sales data scheduled on Thursday. These numbers will provide more information about the state of the economy as the Fed considers the next moves.
A strong retail sales will lower the odds of the Fed cutting interest rates. Besides, a report released last week showed that inflation held steady in September, while another one showed that the labor market held steady last month.
EUR/USD Technical Analysis
The EUR/USD exchange rate formed a double-top pattern around the key resistance point at 1.1200. On the four-hour chart, the pair moved below the key support at 1.1000, its lowest point on September 11.
The pair moved below the 50% Fibonacci Retracement point and the Ichimoku cloud indicator. Therefore, the EUR/USD pair will likely continue falling as sellers target the 78.6% Fibonacci Retracement point at 1.0785.
The alternative scenario is where the pair bounces back since the MACD indicator has formed a bullish divergence pattern. If this happens, the next point to watch will be at 1.09500.
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