Bullish View
- Buy the EUR/USD pair and set a take-profit at 1.0700.
- Add a stop-loss at 1.0500.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.0575 and a take-profit at 1.0500.
- Add a stop-loss at 1.0670.
The EUR/USD exchange rate bounced back as the recent plunge eased. After falling to a multi-month low of 1.0497 last week, the pair rebounded to a high of 1.0590 ahead of European inflation data.
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The pair’s rebound happened as oil prices jumped amid supply disruptions in Norway and Kazakhstan. Brent, the global oil benchmark, rose to $70 while the West Texas Intermediate rose to $69. Higher oil prices could leave US and inflation higher for longer.
The EUR/USD pair also rallied after key speeches by Philip Lane and Christine Lagarde, two senior officials at the European Central Bank (ECB). The two noted that the bank was making progress on inflation, but that work was not done yet, signaling more cuts in the next few meetings.
The next major catalyst for the EUR/USD pair will be the final reading of European’s inflation numbers. Economists expect the data to show that the headline CPI rose from minus 0.1% to 0.3% in October, translating to a YoY increase of 2.0%. Core inflation is expected to come in at 2.7%.
The other notable data to watch will be the upcoming housing starts and building permits numbers. Economists expect the data to show that starts slowed to 1.34 million, while building permits rose to 1.44 million.
EUR/USD Technical Analysis
The EUR/USD exchange rate has been in a strong downward trend after Donald Trump’s election two weeks ago. It has crashed from the year-to-date high of 1.1212 to on September 30 to a low of 1.0497 on Nov. 14.
It formed a doji pattern on Friday and then bounced back to the psychological point at 1.0600, which is also the lowest swing on April 17.
The pair remains below the 50-day and 200-day Exponential Moving Averages (EMA), which formed a death cross last week. In technical analysis, this is one of the most bearish signs in the market.
The Relative Strength Index has pointed upwards and moved from the oversold level. Therefore, theEUR/USD par will likely rise for a few more days and retest the key resistance level at 1.0670 and then resume the downtrend. A move above 0.670 will signal more upside, with the next point being at 1.0700. A drop below 1.0500 will point to more downside.
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