Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1710.
Add a stop-loss at 1.1500.
Timeline: 1-2 days.
Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1500.
Add a stop-loss at 1.1710.
EUR/USD has been calm this week, with traders focusing on the upcoming US consumer and producer inflation numbers, which will help to determine whether the Federal Reserve will hike interest rates next week. Traders are also waiting for the September European Central Bank (ECB) interest rate decision.
ECB Decision and US Inflation Data
EUR/USD pair has been unchanged this week, but the remainder of the week will be important. A key event that will have an impact will be the upcoming European Central Bank (ECB) interest rate decision.
Market participants are largely unanimous that the ECB will decide to hike interest rates by 25 basis points in this meeting. The bank is hiking rates because European inflation has remained above the ECB’s target of 2.0% in the past few months.
Inflation will likely remain at an elevated level because of the ongoing US-Iran war that has pushed energy prices. Saudi Arabia and Houthis have also intensified their attacks this week, pushing Brent to nearly $100.
Since the ECB rate hike is already priced in, chances are that the decision will not have an immediate effect on the pair. Instead, traders will focus on Christine Lagarde’s statement after the decision, in which she will hint on what to expect from the bank.
The EUR/USD pair will then react to the upcoming US producer and consumer inflation numbers on Thursday and Friday, respectively. These are important numbers because the US released strong jobs numbers. As a result, a strong inflation will raise the possibility that the Fed will hike rates as soon as next week.
Economists expect the numbers to show that inflation remained above the Fed’s 2% target as energy prices remained elevated. The average gasoline price has jumped to over $4.1 per gallon, while diesel prices have jumped to $5.9.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has held steady in the past few months. It has remained stable above the ascending trendline that links the lowest levels since June 28 this year.
The pair has also formed a mini golden cross pattern as the 50-day and 100-day Weighted Moving Averages (EMA) have crossed each other. It has also formed an inverted head-and-shoulders pattern.
Therefore, the pair will likely rebound after the ECB decision. If this happens, the next key level to watch will be at 1.1709, its highest level in August this year.
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