(MENAFN- Daily Forex) Bullish view

• Buy the EUR/USD pair and set a take-profit at 1.1830.
• Add a stop-loss at 1.1500.
• Timeline: 1-2 days.

Bearish view

• Sell the EUR/USD pair and set a take-profit at 1.1500.
• Add a stop-loss at 1.1830.

The EUR/USD exchange rate pulled back slightly after a report from the US showed that wholesale prices retreated in August and as traders positioned themselves for the upcoming European Central Bank (ECB) interest rate decision Decision and US Consumer Inflation Data

The EUR/USD exchange rate wavered after a report by the Bureau of Labor Statistics (BLS) showed that the Producer Price Index (PPI) dropped in August, even as Donald Trump's tariffs took effect.

The headline PPI dropped from 3.1% in August to 2.6% in September, while the core PPI moved from 3.4% to 2.8%. While these numbers are higher than the Federal Reserve's target of 2.0%, they are moving in the right direction.

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The data raised hope that the upcoming US consumer price index (CPI) numbers will miss estimates. Analysts expect the upcoming report to show that the core CPI remained unchanged at 3.1%, while the headline figure moved from 2.7% to 2.9%.

Economists have now priced in a potential interest rate cut by the Federal Reserve in the upcoming meeting, especially after a report showed the labor market deteriorated in August. The economy created just 22,000 jobs and the unemployment rate rose to 4.3%.

Most analysts expect the Federal Reserve will cut interest rates by 0.25%, while those from ING and Standard Chartered see it slash it by 0.50%

The next important catalyst for the EUR/USD exchange rate will be the upcoming European Central Bank (ECB) will leave interest rates unchanged at 2.0% now that inflation has remained near the 2.0% target. Unlike the Fed, the bank has been in a cutting cycle in the past few months.

EURUSD Chart by TradingViewEUR/USD Technical Analysis

The daily timeframe chart shows that the EUR/USD exchange rate has jumped sharply this year as the US dollar index plunged. It has soared from a low of 1.0185 in January to the current 1.1698.

The pair has moved above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls are in control. It has also formed an inverse head and shoulders pattern, and is slightly below the neckline at 1.1828.

Therefore, the upcoming Federal Reserve and ECB divergence will likely push it much higher from the current level, potentially to the psychological level at 1.2000.

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