Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0330.
• Add a stop-loss at 1.0445.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.0400 and a take-profit at 1.1050.
• Add a stop-loss at 1.0330.

(Click on image to enlarge)

The EUR/USD exchange rate resumed the downtrend as investors embraced a risk-on sentiment, leading to a higher US dollar. It retreated to 1.0395 on Tuesday morning, down from the year-to-date high of 1.1200.

The EUR/USD pair retreated even after Spain published strong inflation data. According to the statistics agency, the headline Consumer Price Index (CPI) rose from 0.2% in November to 0.4% in December. This growth translated to a year-on-year rate of 2.8%, higher than the expected 2.6%.

These numbers mean that Europe is seeing higher inflation, a move that can complicate the next actions of the European Central Bank (ECB). The bank has already delivered four rate cuts this year and hinted that it would deliver more cuts in the future.

Looking ahead, there will be no major economic data on the final day of the year. The only key numbers to watch will be the latest US house price index (HPI), which will provide more information on house inflation. These numbers will likely have a minimal impact on the pair since volume will be low.
 

EUR/USD Technical Analysis

The weekly chart shows that the EUR/USD pair has been in a strong downward momentum as the US dollar index jumped to $108.25. It has formed a double-top chart pattern at 1.1200, and a neckline at 1.0446. It recently dropped below this neckline, pointing tomore downside in the next few weeks.

The pair’s 100-week and 50-week Exponential Moving Averages (EMA) have formed a bearish crossover pattern. Also, it has formed a bearish pennant chart pattern, a popular bearish continuation sign.

Therefore, the pair will likely continue falling in the next few days as investors price in a potential divergence between the Federal Reserve and the European Central Bank (ECB). The recent guidance showed that the Fed will deliver just two cuts in 2024, while the ECB will cut rates more times next year.

The next point to watch will point to more downside, potentially to the next key support at 1.0330, its lowest point on November 18.

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