Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1725.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1725.
- Add a stop-loss at 1.1500.
The EUR/USD exchange rate continued its strong downtrend, moving from a high of 1.1920 on September 17 to 1.1600. It has continued falling as traders focused on the upcoming US inflation report.
US Inflation Data Ahead
The EUR/USD exchange rate continued falling as market participants prepared for the upcoming US consumer inflation data, which will come out on Friday.
Economists polled by Reuters expect the headline Consumer Price Index (CPI) rose from 2.9% in August to 3.1% in September, continuing a trend that started a few months ago after Donald Trump implemented tariffs.
Core inflation, which excludes the volatile food and energy prices, rose to 3.2% from the previous 3.1%. These numbers mean that inflation is moving further away from the Federal Reserve's target of 2.0%.
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The EUR/USD exchange rate will also react to the upcoming US and European PMI data, which will provide more information about the state of the respective economies.
Economists polled by Reuters expect the data to show that the US manufacturing and services PMI rose to 52 and 54.2, respectively. These numbers will mean that the economy is doing well.
In Europe, analysts expect the number to show that the services PMI eased from 51.3 in September to 51.1 in October, while the manufacturing figure eased from 49.8 to 49.7. These numbers mean that the European Central Bank will leave interest rates unchanged in the next meeting on Thursday.
The EUR/USD pair has also remained under pressure as the US dollar index continued rising. It has moved from the year-to-date low of $96 to $100.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD exchange rate has retreated from the year-to-date high of 1.1920 in September. Its recent uptrend faced substantial resistance at 1.1730, its highest point in October.
The pair moved below the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) moved below the neutral point at 50. Also, the Trend Strength Index (TSI) has continued falling.
Therefore, the pair will likely continue falling as sellers target the next key support level at 1.1500. A move above the resistance at 1.1725 will invalidate the bearish outlook.
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