Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0450.
- Add a stop-loss at 1.0600.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0545 and a take-profit at 1.0645.
- Add a stop-loss at 1.0450.
The EUR/USD exchange rate tumbled to a low of 1.0495, its lowest level since October 6, 2023, as the risk-off sentiment continued following Donald Trump’s victory. It traded at 1.0540 on Monday morning, ahead of key economic data.
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Risk-on Sentiment Continues
The EUR/USD pair continued its steep drop as concerns about the recent Donald Trump election remained.
Traders are concerned about his potential policies like mass deportations and trade wars, which will likely drive inflation upwards in the coming months.
Data released last week showed that US inflation remains stubbornly high. The headline Consumer Price Index (CPI) rose from 2.4% in September to 2.6% in October. Similarly, the core CPI remained at 3.3%, much higher than the Fed’s target of 2.0%.
Jerome Powell, the Federal Reserve’s chair, noted that the bank would be data-dependent and more gradual when cutting rates. In the last monetary policy meeting, it slashed rates by 0.25%, bringing the year-to-date cuts to 0.75%.
There will be no major event from the United States this week, with the key data to watch being Tuesday’s housing starts and business permits and Fed speakers like Michelle Bowman and Austan Goolsbee.
The next key important EUR/USD news will be the upcoming European inflation numbers. Economists expect the data to show that the headline Consumer Price Index (CPI) remained at 2.0%, while the core CPI stood at 2.7%.
These numbers likely have a limited impact on the EUR/USD since the European Central Bank (ECB) has hinted that more cuts are coming.
EUR/USD technical analysis
The daily chart shows that the EUR/USD exchange rate has been in a steep downward trend in the past few weeks. It has already dropped below the key support at 1.100, the neckline of the double-top pattern at 1.1213.
The pair has also formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) have crossed each other. A death cross is one of the most bearish patterns in the market.
The EUR/USD pair has also moved below the key support at 1.0600, its lowest swing on April 16. Therefore, the path of the least resistance is downward, with the next reference level being at 1.0451, its lowest level in September last year. The stop-loss of this trade will be at 1.0610.
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