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EUR/USD Forex Signal: Head&Shoulders Points to More Downside

The EUR/USD pair will likely have a bearish breakout as sellers target the 20-year lows reached in September at 0.9540.

Bearish view

Sell the EUR/USD pair and set a take-profit at 0.9600.Add a stop-loss at 0.9820.Timeline: 1-2 days.

Bullish view

Set a buy-stop- at 0.9800 and a take-profit at 0.9900.Add a stop-loss at 0.9700.

The EUR/USD price continued its bearish trend on Monday morning as the focus shifted to important US housing and UK inflation data. It dropped to a low of 0.9723, about 1.57% from the highest level on October 5.

UK housing and EU inflation data ahead

The GBP/USD pair declined after the Federal Reserve published the past meeting minutes. These minutes showed that officials were still uncomfortable about the soaring inflation in the US. As such, most of them remained committed to increasing rates in the coming months in a bid to fight this inflation.

Data published on Thursday showed that inflation is still a concern in the UK. The headline consumer price index (CPI) dropped to 8.1% while the month-on-month inflation rose to 0.1%. Core inflation rose to the highest level in over 40 years as food and rent remained at an elevated level.

There will be no major economic data from the US and Europe on Monday. Therefore, focus will be on the actions by the European Commission to solve the current gas crisis. According to Bloomberg, the commission plans to propose a mechanism to curb price volatility on the bloc’s energy marketplace. It will impose a dynamic price limit for transactions on the Dutch Title Transfer Facility.

There will also be important economic data that will come out later this week. On Wednesday, the Eurostat will publish the latest inflation data. Economists polled by Reuters, using the preliminary data published last month, believe that the headline consumer inflation rose from 9.1% in August to 10% in September. On a month-on-month basis, analysts believe that inflation rose by 1.2%.

The other important catalyst for the EUR/USD pair will be the upcoming US building permits and housing starts scheduled for Wednesday and existing home sales set for Thursday.

EUR/USD forecast

The four-hour chart shows that the EUR/USD price has been in a downward trend in the past few days. It has moved below the important resistance level at 0.9866, which was the lowest level on September 6. The pair has moved slightly below the 25-day and 50-day moving averages. It has also formed a small head and shoulders pattern while the MACD has been rising.

Therefore, the pair will likely have a bearish breakout as sellers target the 20-year lows reached in September at 0.9540. A move above the resistance at 0.9810 will invalidate the bearish view.

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