Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0915.
- Add a stop-loss at 1.1025.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1025.
- Add a stop-loss at 1.0915.
The EUR/USD exchange rate continued falling this week ahead of the upcoming Federal Reserve minutes and US consumer and producer inflation data. It retreated to 1.0975, its lowest level since August 16, and by 2.20% below its highest level this year.
Fed minutes ahead
The EUR/USD pair retreated as traders waited for the upcoming Fed minutes, which will provide more information about what happened in the last meeting.
In that meeting, officials decided to deliver a jumbo rate cut as concerns about the labor market continued. Before the meeting, the previous data showed that the unemployment rate remained at 4.2% in August.
Recently, however, data released last week showed that the labor market made some modest improvements, with the unemployment rate falling to 4.1% in September.
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The other key catalyst for the EUR/USD will be statements by several Federal Reserve officials like Tom Barkin, Philip Jefferson, Austan Goolbee, and James Williams.
In an interview with the Financial Times, Williams, the head of the New York Federal Reserve, said that the US was well positioned to pull off a soft landing. He also signaled that he supported smaller interest rate cuts in the November and December meeting.
After the Fed minutes, the next important EUR/USD catalyst will be the upcoming US inflation data scheduled on Thursday. These numbers are expected to confirm that the consumer prices dropped in September, with the headline CPI expected to drop to 2.3%.
EUR/USD technical analysis
The EUR/USD exchange rate has been in a strong downward trend in the past few days after it formed a double-top chart pattern around the 1.1200 level. It has slipped below this pattern’s neckline at 1.000, meaning that bears are in control.
The pair has also dropped below the 50-day and 25-day Exponential Moving Averages (EMA). It was also approaching the 61.8% Fibonacci Retracement point, while the Percentage Price Oscillator (PPO) has moved below the zero line.
Notably, the EUR/USD pair has formed a bearish pennant chart pattern. Therefore, the pair will likely continue falling as sellers target the next key support level at 1.0915, its highest point on June 4.
The alternative scenario is where the pair rebounds, retests the psychological point at 1.1000, and then resumes the downtrend.
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