Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1710.
Add a stop-loss at 1.1550.
Timeline: 1-2 days.
Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1550.
Add a stop-loss at 1.1710.
EUR/USD was flat on Tuesday as traders turned their attention to the upcoming US inflation data and the European Central Bank's interest rate decision. The pair traded at 1.1623, staying within the narrow range it has held over the past few days. That level sits about 75 basis points below its August high.
ECB Interest Rate Decision and US Inflation Data
EUR/USD remains in a tight range, but this could change in the next few days as market participants react to key macro events. These events come a few days after the US published strong nonfarm payrolls (NFP) data, which showed that the economy created 162k jobs last month.
One of the crucial macro events to watch will be the US producer and consumer inflation reports, which will come out on Thursday and Friday, respectively. Odds are that inflation remained above the 2% target because of the rising energy prices, with diesel trading at a record high. The average gasoline price has jumped to $4 as the US-Iran war has continued.
These numbers will come a week before the Federal Reserve interest rate decision on Wednesday next week. A higher inflation rate than expected will raise the odds that the Fed will hike rates.
The other key EUR/USD news to watch this week will be the upcoming European Central Bank (ECB) interest rate decision. Economists expect the bank to hike interest rates by 25 basis points as it battles the elevated inflation, which has remained above the 2% target.
The ECB decision comes three days after Eurostat published the latest Eurozone GDP data. These numbers showed that the European economy grew by 0.6% in the second quarter after contracting by 0.2% in the previous quarter.
EUR/USD Technical Analysis
The four-hour chart shows that the EUR/USD pair has dropped from the year-to-date high of 1.1710 in August to the current 1.1621. It has moved slightly below the 23.6% Fibonacci Retracement level at 1.1626.
The pair has formed a symmetrical triangle pattern whose two lines are nearing their confluence level. It has moved slightly above the 50-period Exponential Moving Average (EMA), while the Percentage Price Oscillator (PPO) has moved above the zero line.
Therefore, the token will likely have a bullish breakout, potentially to the August high of 1.1710, which is about 0.76% above the current level.
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