Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1700.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1700.
- Add a stop-loss at 1.1500.
The EUR/USD exchange rate drifted downwards as European Central Bank (ECB) officials maintained a cautious tone on interest rates. It dropped to 1.1600, down from the year-to-date high of 1.1905.
ECB Caution and US Inflation Data Ahead
The EUR/USD pair retreated a bit as some ECB officials maintained caution and the US dollar index rose and approached the key resistance level at 100.
In a statement, Yannis Stournaras, the head of the Greek Central Bank, said that the bank had achieved a soft landing for the economy. He noted that inflation had moved to the 2% target and that the economy was still resilient.
Other officials, including Philip Lane, the chief economist, have recently signaled that they were comfortable with where the bloc was in terms of inflation, which has dropped to the psychological level at 2%. Christine Lagarde, the bank's governor will talk today and provide hints on what to expect in the next meeting on October 30.
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The EUR/USD pair retreated slightly as the US dollar index rose to nearly $100 ahead of a meeting between US officials and those from China. Officials hope that the meeting may help to lower tensions between the two countries ahead of the upcoming meeting between Trump and Xi Jinping at the APEC Summit.
A deal between the two countries will be mutual in that it would lower tension and possibly promote trade, which would help to support the respective economies.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD exchange rate has pulled back in the past few weeks, moving from a high of 1.1920 in September to the current 1.1600. It has moved slightly below the 50-day Exponential Moving Average (EMA).
The Percentage Price Oscillator has moved below the neutral point at zero, while other oscillators like the Relative Strength Index and the MACD have all pointed downwards.
It has formed a head-and-shoulders pattern, which is a common bearish reversal sign.
Therefore, the most likely scenario is where the pair falls to the key support at 1.1543, its lowest level on October 9. A move above the 50-day moving average at 1.1667 will invalidate the bearish view.
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