Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0400.
• Add a stop-loss at 1.0760.
• Timeline: 1-2 days.

Bullish View

• Buy the EUR/USD pair and set a take-profit at 1.0760.
• Add a stop-loss at 1.0400.

(Click on image to enlarge)

The EUR/USD exchange rate continued its strong sell-off as the US dollar index surge gained momentum. It crashed to a low of 1.0596 on Wednesday, its lowest level since April 17 as traders eye the upcoming US inflation data. It has fallen by 5.42% from its highest level this year.
 

US inflation Data Ahead

The EUR/USD pair’s sell-off gained momentum as investors watched the ongoing Donald Trump’s transition and the potential risks. He has already appointed his top officials to deal with mass deportations, which could push inflation higher.

The next important catalyst for the EUR/USD pair will come out on Wednesday when the Bureau of Labor Statistics (BLS) publishes the October Consumer Price Index (CPI) data.

Economists expect the data to show that the headline CPI rose slightly from 2.4% in September to 2.6% in October. They see the monthly CPI coming in at 0.2%.

The core CPI, which excludes the volatile food and energy prices, is expected to remain at 0.3% and 3.3%, respectively.

These numbers will come a few days after the Federal Reserve delivered its interest rate decision. In it, officials voted to cut interest rates to between 4.5% and 4.75%, citing the deteriorating labor market.

The most recent jobs numbers showed that the economy created just 12,000 jobs, while the unemployment rate remained above 4.1%.

The other key EUR/USD event to watch will be a few statements by Fed officials like Laura Logan, Neel Kashkari, and James Williams. These officials will provide more hints on what to expect in the last meeting of the year in December.
 

EUR/USD Technical Analysis

The EUR/USD exchange rate has been in a strong downward trend in the past few days. It has dropped below the bottom of trading range of the Murrey Math Lines.

The pair has also moved below the key support level at 1.0665, its lowest level on June 14. It has also formed a death cross as the 50-day and 200-day Weighted Moving Averages (WMA) crossed each other.

The Relative Strength Index (RSI) has continued moving downwards. Therefore, the path of the least resistance for the pair is downwards, with the next target being the psychological level at 1.0400. The stop loss of this trade will be at 1.0760, its lowest swing on October 23rd.

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