Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0600.
- Add a stop-loss at 1.0730.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0695 and a take-profit at 1.0765.
- Add a stop-loss at 1.0600.
The EUR/USD exchange rate dived sharply after mixed European and American economic numbers. It plunged from last Friday’s high of 1.0750 to a low of 1.0680, its lowest swing since Thursday.
Federal Reserve decision ahead
The EUR/USD pair crashed as traders embraced a risk-off sentiment in the market ahead of the Fed decision. In Europe, data revealed that some key countries were doing well as energy prices retreated.
A report by Italy’s statistics agency showed that the economy expanded by 0.3% in Q1, higher than the expected 0.1%. It grew by 0.6% on a YoY basis. In Germany, the economy grew by 0.2% as it moved out of a technical recession.
In Spain and France, the economies grew by 2.4% and 1.1% on a YoY basis, respectively. At the same time, inflation in the region was soft. The headline CPI dropped from 0.8% to 0.6% on a MoM basis. It remained unchanged at 2.4% while the core CPI moved from 2.9% to 2.7%.
These numbers are supportive of the view that the European Central Bank (ECB) will be comfortable cutting interest rates as soon as June this year. If this happens, it will be the first-rate cut in years.
Meanwhile, in the United States, a report by the Conference Board revealed that consumer confidence dropped from 103.1 in March to 97 in April, the lowest level since June 2022. Most consumers are concerned about inflation, which has remained stubbornly high.
They are also concerned about high-interest rates, which have moved to the highest level in over two decades. Also, they are worried about the labor market as some big companies have slashed their workers.
Looking ahead, the EUR/USD pair will react to the upcoming ADP employment report, ISM manufacturing PMI, JOLTs job openings, and the Federal Reserve interest rate decision. A hawkish Fed will likely lead to a strong US dollar.
EUR/USD forecast
The EUR/USD pair made a bearish breakout after the US consumer confidence and European economic numbers. This drop happened after the pair formed a rising wedge pattern, which is a popular bearish sign.
The pair has dropped below the 50-period moving average while the Relative Strength Index (RSI) has crashed below the neutral point of 50. It also retreated below the key support at 1.0695, its lowest swing on Valentine’s Day.
The pair also moved below the strong pivot reverse point of the Murrey Math Lines. Therefore, the outlook for the pair is bearish, with the next target to watch being at 1.0600. Alternatively, the pair could retest the lower side of the rising wedge pattern at 1.0715.
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