The EUR/USD forecast is bearish and the next key target is 1.0500.
Bearish View:
- Sell the EUR/USD pair and take profit at 1.0500.
- Add stop loss at 1.0712.
- Duration: 1-2 days.
Bullish Vision:
- Set a buy stop at 1.0600 and take profit at 1.0720.
- Add stop loss at 1.0550.
EUR/USD rose slightly after relatively encouraging European inflation data and the Fed’s latest minutes. It rose as high as 1.0632, slightly above this month’s low of 1.0517. The focus is now on the next US jobs data due on Friday.
European inflation is cooling
Preliminary data released this week showed that consumer and producer prices were falling in Europe. Data from Germany’s statistics agency showed on Tuesday that headline consumer inflation fell 0.8% in December. This translated into 8.6% annual growth.
Data from the French statistics office showed on Wednesday that headline inflation fell 0.1 percent, bringing annual growth to 5.9 percent. These inflation figures came after energy prices fell on the block.
There is a possibility that this decline in prices will continue, at least in the short term. Natural gas prices have continued to decline as forecasters predict this winter will be much warmer. Gas for February delivery fell 11% on Tuesday to $3.98 per British thermal unit. That’s down 50% from its summer high and where it was a year ago.
So these encouraging inflation numbers mean the European Central Bank (ECB) won’t be under too much pressure to adjust. Analysts expect another 0.50% interest rate hike in February, followed by a small increase.
Meanwhile, minutes released by the Federal Reserve showed committee members had mixed feelings about the economy. Some advocated more aggressive moves, while others advocated caution to avoid a crash landing. Analysts expect another 0.50% rate hike in February.
The next major catalyst will be the latest US jobs numbers. Data on Wednesday showed job openings fell to 10.45 million in November. Economists expect the economy to add more than 200,000 jobs in December, while the unemployment rate fell to 3.6%.
EUR/USD forecast
The EUR/USD pair moved sideways after the FOMC minutes. It is consolidating at the 50-period moving average, while the stochastic oscillator has moved to neutral. The pair has also moved slightly below the uptrend line shown in black. It also found strong resistance at 1.0712, the previous week’s high.
The pair formed a breakout and retest pattern, retesting the uptrend line. The forecast for the pair is bearish and the next major target is 1.0500. The stop-loss of this trade will be 1.0700.
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