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The EUR/USD pair continued retreating as the US dollar strength remained.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0600.
- Add a stop-loss at 1.0745.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0720 and a take-profit at 1.0850.
- Add a stop-loss at 1.1.0650.
The EUR/USD continued pulling back as the US dollar index (DXY) strength gained steam. It plunged to a low of 1.0677, the lowest point since January 9. After peaking at 1.1040 on February 1, the pair has retreated by ~3.28%.
Important economic data ahead
Last week was a bit muted in the financial market. The main events were a statement by Jerome Powel and other Fed officials like Raphael Bostic and Neel Kashkari. These officials pointed to more rate hikes since the tight labor market will make it difficult to fight inflation.
This week will be different as the American statistics agency will publish important economic numbers. On Tuesday, the US will publish the closely watched inflation numbers, which will have an impact on most assets, including stocks and cryptocurrencies.
Expectations are that inflation remained sticky in January because of the high service prices. The headline consumer price index (CPI) is expected to come in at 0.4% on a month-on-month basis and by 6.2% on an annualized basis. If analysts are accurate, then it means that inflation has dropped in the past seven months straight.
The other important economic data will be American retail sales numbers scheduled for Wednesday. Economists expect that the country’s retail sales rebounded by 1.6% in January after plunging in the previous several months. While retail sales are important numbers, their role will be overshadowed by the inflation numbers.
Meanwhile, from Europe, the EUR/USD pair will react to the upcoming statement by Christine Lagarde of the European Central Bank (ECB) on Wednesday. She will likely provide more signals of what the bank will do next. There will be other economic numbers like the latest European industrial production and GDP data.
EUR/USD forecast
The EUR/USD pair continued retreating as the US dollar strength remained. It has successfully moved below the green ascending channel. At the same time, the pair remains significantly below the 25-day and 50-day volume-weighted moving averages (VWMA).
A closer look shows that the pair seems to be forming a double-bottom pattern at about 1.0668. The neckline of this pattern is at 1.0790. In analysis, a double-bottom pattern is usually a bullish sign. Therefore, while the outlook of the pair is bearish, sellers need to successfully clear the double-bottom pattern. If they do, the next level to watch will be at 1.0600.
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