Bearish Trend Has More Room to Run

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Bearish view

Sell the EUR/USD pair and set a take-profit at 0.9600.
Add a stop-loss at 0.9750.
Timeline: 1-2 days.

Bullish view

Set a buy-stop at 0.9750 and a take-profit at 0.9850.
Add a stop-loss at 0.9650.

The EUR/USD price has been in a strong downward trend as the US dollar strength continued. It dropped to a low of 0.9700, which was the lowest level since September 29th. The pair has dropped by more than 3% from its highest level this month.

Hawkish Fed expected

The EUR/USD price continued its bearish trend as hopes of a more hawkish Federal Reserve continued. In a statement, Fed Vice Chairwoman Lael Brainard cautioned that it would take time for the bank’s actions to reduce inflation. She also said that the bank will continue hiking interest rates in the coming months. The statement added that:

“Monetary policy will be restrictive for some time to ensure that inflation moves back. It will take time for the cumulative effect of tighter monetary policy to work through the economy and to bring inflation down.”

Other Fed officials have been extremely hawkish as well. For example, officials like Charles Evans, Raphael Bostic, and Jerome Powell said that the bank will likely hike by another 125 basis points this year. That will be on top of the 300 basis points the bank has hiked this year alone.

Later today, Fed officials like Patrick Harker and Loretta Mester are also expected to sound a bit hawkish in their speeches.

The EUR/USD price will also react to the latest consumer expectation data from the United States. Inflation expectations are important because they impact consumer spending. According to the Federal Reserve, the 10-year breakeven inflation rate has dropped to the lowest level since December 2020.

The pair will also react to a statement by a statement by ECB economist, Philip Lane. He is expected to reiterate that the European Central Bank (ECB) will continue hiking interest rates to counter the soaring consumer and producer inflation.

EUR/USD forecast

The four-hour chart shows that the EUR/USD price has been in a strong bearish trend in the past few days. It has moved below the standard pivot point at 0.9823. The pair has moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the neutral point. The MACD has moved below the neutral level.

Therefore, the pair will likely continue falling ahead of the upcoming American consumer inflation data. The next key level to watch will be at 0.9600. A move above the resistance at 0.9750 will invalidate the bearish view.