Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0400.
- Add a stop-loss at 1.0650.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0580 and a take-profit at 1.0650.
- Add a stop-loss at 1.0400.
The EUR/USD pair continued its strong bearish trend, falling to its lowest level since November 2023 after the US published the October inflation data. It tumbled to a low of 1.0565, much lower than the year-to-date high of 1.1212.
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US Dollar Index Surge Gains Steam
The EUR/USD pair’s drop accelerated after the US dollar index surged to $106.50, its highest level since April 30. It has soared by over 6% from its lowest level this year, a trend that accelerated after Donald Trump won the US election.
Trump has pledged a bg agenda that includes tax cuts, tariffs, deportation, and deregulation. Restarting the trade war, especially with China will likely lead to higher inflation since these tariffs will be passed to consumers.
The massive deportations that he has promised, on the other hand, will lead to labor shortages in key sectors like agriculture and construction. Participants in these sectors will likely hike wages to attract more workers, costs that will be passed to consumers.
The pair’s retreat accelerated after the US published strong inflation numbers that were in line with estimates. The headline Consumer Price Index (CPI) remained at 0.2% on a MoM basis, and rose to 2.6% on a YoY basis.
Core CPI, which excludes the volatile food and energy prices, remained unchanged at 0.3% and 3.3% on a MoM and YoY basis, respectively.
These numbers came a few days after the Federal Reserve delivered its second interest rate cut of the year. It cut rates by 0.25% last week, bringing the year-to-date cuts to 0.75%. Officials hinted that more cuts were coming while maintaining their data dependence. They believe that inflation will get to 2.0% in the coming months.
EUR/USD Technical Analysis
The EUR/USD exchange rate continued its bearish momentum as the US dollar index rally accelerated. It has dropped below the key support at 1.0600, its lowest swing on April 16.
The pair has also formed a death cross pattern as the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other. Also, it dropped to the strong pivot and reverse point of the Murrey Math Lines.
Oscillators like the Relative Strength Index (RSI) and the MACD have also pointed downwards. Therefore, the pair may continue falling, with the next level to watch being at 1.0400.
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