In case of a downtrend
- Take a short EURUSD trade and set your take profit order at 1.0200.
- Set your stop loss order at 1.0420.
- Hours: one or two days.
On an upward trend
- Take a long trade in the EURUSD currency pair and set the take profit order at 1.0500.
- Set your stop loss order at 1.0250.
The price of the EURUSD currency pair continued to rise as investors embraced the risk-off sentiment following the weak inflation data in the US. It jumped to a high of 1.0358, the highest point since July this year. It has rebounded more than 8% from its lowest point this year.
The euro is gaining momentum
The EURUSD currency pair had its best week since 2020 as the US dollar fell. The US dollar index, which measures the greenback’s performance against other currencies, is down more than 8% from its high point this year.
It fell as investors began to price in the Fed’s pivot over the next few months as inflation started moving in the right direction. Data released by the Bureau of Labor Statistics (BLS) revealed that headline and core inflation fell sharply last month.
Headline inflation fell from 8.3% to 7.7%, while core inflation fell to 6.3%. Prices for most items appear to have peaked, with the average price of gasoline hovering around $3.12. It peaked at $5 a few months ago.
Therefore, there is a possibility that the Federal Reserve will start rotating during the last meeting of the year. Such a pivot would include slowing the pace of interest rate hikes to 0.50%. In a statement last week, Patrick Harker of the Federal Reserve Bank of Philadelphia said he would support a smaller rate hike at upcoming meetings. He said:
“Over the coming months, given the cumulative tightening we’ve achieved, I expect we will slow the pace of rate hikes as we get closer to a sufficiently constraining situation.”
Other Fed officials also support a move from 0.75% gains. Dallas’ Larry Logan and Cleveland’s Laureate Masters said the bank should slow rate hikes. The Fed’s rate watch expects interest rates to rise 0.50% in December.
EUR/USD currency pair trading forecast
The four-hour chart shows that the EURUSD was in a strong uptrend after collapsing to a low of 0.9541 in September. It managed to clear the important resistance level at 1.0094, the high from October 26th. The pair has moved above all the moving averages.
The Stochastic Oscillator and RSI are moving above the overbought level. So, as the trend continues to the upside, I believe this pair will get some breathing room as traders take profits. If so, it could retest the support at 1.0200.
