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EUR/USD Forex Signal: Stuck in a Tight Range as Triangle Pattern Forms – 20 October 2022

The EUR/USD also reacted to the latest housing data from the US. Housing starts made a strong reversal in September as they dropped by 8.1% to 1.43 million.


Bearish view

Sell the EUR/USD pair and set a take-profit at 0.9630.Add a stop-loss at 0.9850.Timeline: 1-2 days.

Bullish view

Set a buy-stop at 0.9810 and a take-profit at 0.9950.Add a stop-loss at 0.9700.

The EUR/USD price retreated as the US dollar made a strong comeback on Wednesday. It declined to a low of 0.9760, which was slightly lower than this week’s high of 0.9867. This decline happened after Europe published strong inflation data and the US delivered mixed housing numbers.

European inflation rises

There were several reasons why the EUR/USD price pulled back in the American and Asian sessions. First, the increase coincided with a slight increase in volatility. After dropping for two straight days, the volatility index (VIX) rose by almost 2%. As it rose, American indices like the Dow Jones had their first down day in two days.

Second, the pair dropped because of the rising risks on Ukraine. Russia continued its bombardment campaign in Ukraine, where it is targeting critical infrastructures like power and electricity. In a statement, Putin declared martial law in the four provinces that it ceased recently. Therefore, there is a likelihood that this crisis will continue for longer.

Third, Eurostat published the latest inflation data on Wednesday. The numbers showed that the headline inflation in the euro area rose by 9.9% in September after rising by 9.1% in August. This was a significant increase since inflation was at 3.4% in the same period in 2021.

According to Eurostat, the biggest contributors to inflation were energy, food and services. Therefore, the European Central Bank will likely continue hiking interest rates when it concludes its meeting next week.

The EUR/USD also reacted to the latest housing data from the US. Housing starts made a strong reversal in September as they dropped by 8.1% to 1.43 million. Building permits, on the other hand, rose by 1.45 to 1.5 million. The US will publish the latest existing home sales and the Philadelphia Fed manufacturing index. It will also react to some options expiry set for Thursday and Friday.

EUR/USD forecast

The EUR/USD pair pulled back after rising on Monday and Tuesday. It retreated after it moved close to the second resistance of the standard pivot point. On the four-hour chart, it is nearing the confluence level of the symmetrical triangle pattern shown in blue. It has also crossed the 25-day moving average while the Relative Strength Index (RSI) has moved below the neutral point.

Therefore, the pair will likely continue consolidating in the current range. A drop below the pivot point at 0.9725 will bring 0.9630 to view. A move above the first resistance at 0.9810 will bring parity to view.

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