Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1600.
- Add a stop-loss at 1.1900.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1900.
- Add a stop-loss at 1.1600
The EUR/USD exchange rate was flat on Wednesday this week as market participants reacted to the latest government shutdown in the United States and its implications on the American economy. It was trading at 1.1740 up from last week's low of 1.1635.
Christine Lagarde Statement and US Jobs Data
The EUR/USD exchange rose slightly after Christin Lagarde, the head of the European Central Bank (ECB) delivered a closely-watched speech.
In it, she noted that the bloc’s inflation was relatively stable at its target of 2.0% and that there was no serious threat to it. Nonetheless, she recommended that the bank should remain vigilant to prevent it from rising.
The statement means that the ECB will not be in a hurry to cut interest rates this year. Instead, economists expect it to leave them unchanged at the current 2% and then respond only when situations change.
Eurostat, the bloc’s statistics agency, will publish the latest European consumer inflation report later on Wednesday and analysts expect the headline number to come in at 2.2%, higher than the previous 2%. Core inflation is expected to come in at 2.3%.
The pair also wavered after the US released a series of mixed economic numbers. Data shows that the country’s consumer confidence dropped sharply in September to 94.2, down from August‘s 97.8. Consumers are concerned about Donald Trump's tariffs and the weakening labor market.
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Consumer confidence will likely remain under pressure now that a government shutdown has happened, with Donald Trump threatening to fire workers instead of furloughing during the period.
The most important report to watch will be the upcoming ADP jobs report. Economists expect the report to show that the private sector created 50k jobs in September after adding 54k in the previous month.
The ISM will also publish the manufacturing PMI, while S&P will publish the European and American manufacturing PMI, which will provide more color on the economic growth on the economies.
EUR/USD Technical Analysis
The EUR/USD exchange rate has been in an uptrend in the past few months and is now hovering near the year-to-date high at 1.1915.
It remains above the ascending trendline that links the lowest swings since May 12. It has also remained above the 50-day moving average, which is a bullish sign.
There are signs that the uptrend is losing momentum as the Average Directional Index has drifted downwards. Therefore, the pair may drop towards the support at 1.1600.
A move above the YTD high of 1.1915 points to more gains, potentially to the psychological level at 1.2000.
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