Bearish View
Sell the EUR/USD and set a take-profit at 1.1235.
Add a stop-loss at 1.1350.
Timeline: 1 day.
Bullish View
Buy the EUR/USD and set a take-profit at 1.1350.
Add a stop-loss at 1250.
The EUR/USD pair retreated slightly as US equities continued their Santa Claus rally. The pair declined to a low of 1.1290, which was the lowest level since Thursday last week.
US Home Prices Easing
The EUR/USD declined after the latest US home prices data. The numbers showed that the country’s home prices slowed for the third straight month, signalling that the red-hot housing market was started to cool down. The closely-watched Case-Shiller Home Price Index (HPI) rose by 19.1% in October after rising by 19.7% in the previous month.
The median home price rose by 13.9% to $353,900, signalling that the housing market is starting to price out many people. The best-performing city in the US was Phoenix, Arizona, where home prices rose by 32.3%. The city has seen many technology companies establish a base there.
The hot housing market is not only happening in the United States alone. The same trend is happening in other countries like the United Kingdom, Australia, Germany, and New Zealand. The cause is low interest rates and the overall lack of inventories in these countries.
Later today, the EUR/USD pair will react mildly to loan data from the European Union. The ECB will publish the latest data on loans to individuals and non-financial sector. Analysts expect the data to show that the private sector rose from 4.1% in October to 4.2% in November.
The other key data to watch will be the latest US mortgage and refinance data for the previous week. These numbers are expected to show that the number of mortgage applications declined for the third week in a row.
EUR/USD Forecast
The EUR/USD pair has been stuck in a narrow range in the past few weeks. The pair has struggled moving above the key resistance level at 1.1360. As a result, the pair is trading at the 25-day moving average while the width of the Bollinger Bands has narrowed. The pair’s Average True Range (ATR) has also declined, signalling that volatility has declined.
The pair declined to a low of 1.1290 in the overnight session and then pulled back. It has also formed a small double-top pattern. Therefore, there is a possibility that the pair will likely keep falling as bears target the key support at 1.1235.
