(Technical Analysis) EUR/USD Forex Signal: On the Verge of a Bearish Breakout
Market analysis
The EUR/USD pair is showing signs of weakness, pulling back from its recent highs amid data indicating a faster-than-expected decline in European inflation. The currency pair retreated to 1.1115, slightly down from the previous month’s high of 1.1205, as investors shifted their focus to upcoming European inflation data and US PMI figures. This trend suggests the potential for a bearish breakout as economic pressures mount.
Bearish View:
- Trade: Sell EUR/USD.
- Take Profit: Set at 1000.
- Stop Loss: Set at 1205.
- Timeline: 1-2 days.
Bullish View:
- Trade: Buy EUR/USD.
- Take Profit: Set at 1205.
- Stop Loss: Set at 1000.
EUR/USD Signal for Today – 01/10: Bearish Breakout Looms
The EUR/USD pair experienced a pullback as recent economic data showed European inflation declining more than expected. The pair fell to 1.1115, down a few pips from last month’s high of 1.1205, with attention now shifting to upcoming European inflation figures and US PMI data.
European Inflation in Focus
The likelihood of further declines in European inflation is rising. According to the German statistics agency, the headline Consumer Price Index (CPI) retreated to 1.8% in September, the lowest since February 2021 and below the European Central Bank’s (ECB) target of 2.0%. Similar trends have been observed in other major European economies such as Spain and France. Analysts expect that the upcoming data will confirm that the headline CPI dropped from 2.2% in August to 1.9% in September, while the core CPI decreased from 2.8% to 2.7%.
These data points imply that the ECB may continue reducing interest rates in the upcoming meeting. Moreover, signs indicate a slowing European economy, with the German economy expected to contract by 0.1% this year, according to IFO’s recent downgrade.
The EUR/USD pair also declined after comments from Federal Reserve Chair Jay Powell, who expressed increasing confidence that the US economy was heading for a soft landing, suggesting that interest rates could continue to fall to a level that supports growth.
Key Data Releases
Looking ahead, the Institute of Supply Management (ISM) will release its latest Manufacturing PMI figures, which are expected to provide further insight into the health of the economy. Analysts anticipate that the PMI will confirm that the manufacturing sector remained in contraction territory in September. Additionally, the JOLTS job openings report will be crucial to understanding the current state of the labour market.
EUR/USD Technical Analysis
The EUR/USD pair retreated slightly ahead of upcoming US and European inflation data, moving from last month’s high of 1.1205 to 1.1125, an important pivot point according to Murrey Math Lines. The pair remains above the 50-day moving average, but it has also formed a double-top chart pattern, which is a popular bearish signal. Furthermore, the Percentage Price Oscillator (PPO) has shown a bearish divergence pattern.
As a result, it is likely that the pair could see a bearish breakout, with traders targeting the psychological level of1.1000.