Created on December 18, 2024

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Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0400.
• Add a stop-loss at 1.0565.
• Timeline: 1-2 days.

Bullish View

• Buy the EUR/USD pair and set a take-profit at 1.0565.
• Add a stop-loss at 1.0400.

The EUR/USD exchange rate remained in a tight range after the mixed US retail sales data and ahead of the upcoming Federal Reserve decision. The pair was trading at 1.0500, where it has been stuck in the past few days.

Fed Decision and European Inflation Data

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The EUR/USD pair was on edge after the US released the November inflation data. According to the Commerce Department, the headline retail sales rose from 0.5% in October to 0.7% in November, higher than the median estimate of 0.6%.

Core sales, which excludes the volatile food and energy prices, remained unchanged at 0.2%. These numbers mean that consumer spending is doing well, helped by the rising automobile sales in the country.

The US also released other weak economic numbers. Industrial production dropped by 0.1% in November, lower than the expected growth of 0.3%. The manufacturing production rose from minus 0.7% to 0.2%.

Therefore, these numbers, together with the recently released weak unemployment rate data, hints that the Fed will continue cutting interest rates later today. The consensus view is that it will cut rates by 0.25% and hint at gradual easing in the future.

The other important EUR/USD news will be the upcoming European Consumer Price Index (CPI) data. Economists expect the data to show that the headline CPI fell from 0.3% in October to minus 0.3% in November. The expectation is that the CPI rose from 2.0% to 2.3% in the same period.

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Core inflation is expected to remain unchanged at 2.7%. These numbers will not have a major impact on the EUR/USD pair because the ECB has already delivered its interest rate decision. It slashed rates and hinted towards more cuts in 2025.

EUR/USD Technical Analysis

The EUR/USD exchange rate was stuck in a range ahead of the upcoming Fed interest rate decision. It has dropped below the important resistance level at 1.0600, its lowest swing on April 16 of this year.

The pair has formed a bearish flag chart pattern, which is shown in black below. It is now stuck near the lower side of this pattern. Also, it has remained below the 50-day and 25-day moving averages. The exchange rate has also fallen below the Woodie pivot point at 1.0605.

Therefore, the pair will likely have a bearish breakout, with the next target to watch being at 1.0400. This view will be confirmed if it moves below the lower side of the flag.

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