Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0100.
- Add a stop-loss at 0.9850.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.9950 and a take-profit at 0.9850.
- Add a stop-loss at 1.0100.
The EUR/USD price pulled back slightly after the latest interest rate decision by the ECB and the strong American PCE data. It dropped to a low of 0.9965, which was lower than last week’s high of 1.0095. The price remains about 4.47% above the lowest level in October.
EU inflation and Fed decision ahead
The European Central Bank continued its monetary policy meeting last week and decided to hike rates by0.75% for the second meeting in a row. The move pushed the main interest rate to 1.5%, the highest level in more than a decade.
At the same time, the bank decided to tighten its screws for European banks by limiting payments it makes to them. Banks used these ultralow interest rates to lend to both people and companies. In her statement, Christine Lagarde said that the bank would continue hiking interest rates further in the coming meetings even as she cautioned about the state of the economy.
The EUR/USD and EU bond yields declined because her statement sounded a bit dovish. Focus now shifts to the preliminary European consumer inflation data scheduled for later today. Economists expect the data to show that the headline consumer inflation rose from 9.9% to 10.2% in October.
Core inflation, which excludes the volatile food and energy prices, is expected to have remained at 4.8%. Analysts expect that the bloc’s inflation will ease slightly since European gas prices have dropped recently. At some point this month, gas prices moved to the negative level due to near-full storage.
The EUR/USD price will also react to the latest interest rate decision by the Federal Reserve. Economists are pricing an additional 0.75% rate hike by the Fed. The bank has already hiked rates by 300 basis points this year.
EUR/USD forecast
The EUR/USD price pulled back slightly after the ECB interest rate decision. As it dropped, it moved slightly below the important support level at 0.9996, which was the highest level on October 5. The current price is along the 50% Fibonacci Retracement level. It also retreated from the third resistance of the standard pivot point to the first resistance.
The pair remains slightly above the 25-day and 50-day moving averages. Therefore, the outlook is still bullish, with the next key resistance level being at 1.0100.
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