Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0335.
- Add a stop-loss at 1.0600.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0500 and a take-profit at 1.0600.
- Add a stop-loss at 1.0335.
The EUR/USD exchange rate remained under pressure as traders reflected on the ongoing risks of a trade war between the US and other partners, including those in Europe. The pair retreated to a low of 1.0470, down by 6.68% from its highest level this year.
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Key US Economic Data Ahead
The EUR/USD pair retreated after Donald Trump threatened major tariffs on US imports on day one of his administration. While he did not mention European countries, analysts believe that the bloc could be exposed to his policies.
Analysts believe that tariffs are inflationary since goods coming from its biggest trading partners like Mexico and Canada will be passed on to consumers, leading to higher inflation.
On top of this, Trump has threatened to deport millions of illegal migrants, which will lead to labor shortages in key sectors like hospitality, agriculture, and construction. Still, analysts believe that it will almost be impossible to deport all these people because of the limited financial and human resources.
The EUR/USD pair also retreated after the US published the latest new home sales, building permits, and consumer confidence data. According to the Conference Board, consumer confidence rose from 109.6 in October to 111.7 in November, missing the analyst estimates of 111.8.
New home sales moved from 738k to 610k, while building permits jumped to 1.41 million, higher than the expected 1.416 million.
The EUR/USD could be highly volatile on Wednesday as the US publishes several important economic numbers. The most notable ones will be the headline and core personal consumption expenditure (PCE) data.
The US will also release the latest durable goods order data, retail inventories, initial jobless claims, and personal income. These numbers will come earlier because of Thursday’s ThanksGiving holiday.
EUR/USD Technical Analysis
The EUR/USD exchange rate has been in a strong downward trend in the past few weeks as investors embraced a risk-off sentiment. It was trading at 1.0463 on Wednesday morning, lower than the key support at 1.0600, its lowest level on April 16.
The pair has formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) have formed a cross over. Also, the MACD and the Relative Strength Index (RSI) have continued falling. Therefore, the path of the least resistance is downwards, with the next point to watch being at 1.0335.
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