Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.0620.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 1.0662 and a take-profit at 1.0525.
- Add a stop-loss at 1.0750.
The US dollar index pulled back to $103 as an uneasy calm resumed in the market on Monday. As a result, the EUR/USD pair rose to a high of 1.0730, the highest level since March 15. The pair has jumped sharply from last week’s low of 1.0522.
The performance of the banking sector is the main theme in the market this week. On Monday, investors were still assessing the impact of the decision by UBS to acquire Credit Suisse at a throwaway price. Credit Suisse stock dropped by over 50% in Switzerland and New York.
First Republic Bank is also in the spotlight as efforts to save it appear to be failing. The stock has been in a freefall in the past few weeks as outflows have increased. Last week, a consortium of the biggest banks in the US deposited $30 billion in the bank. Still, it received several credit rating downgrades from Moody’s, S&P Global, and Fitch.
The EUR/USD rose as the US dollar index slumped to $103 and American indices like the Dow Jones and S&P 500 indices jumped by almost 1%. Government bond yields also continued rising.
The main focus among traders will be the upcoming interest rate decision by the Federal Reserve. Economists expect that the Fed will be at a crossroads when making that decision since it will need to balance the need for fighting inflation and ensuring financial stability.
The bank could decide to follow the ECB’s direction by sticking with its 0.50% rate increase. However, Fed futures point to a modest 0.25% interest rate hike. This will be a balanced strategy as the Fed sticks to its hawkish guidance.
EUR/USD technical analysis
The EUR/USD exchange rate bounced back after falling to a low of 1.0522 on March 15. It has managed to move above the 20-period and 50-period volume-weighted moving average (VWMA) and the important resistance point at 1.0695. That price was its highest level on March 6. The Relative Strength Index (RSI) has moved above 50.
Therefore, the pair has some more upside to make as buyers target last week’s high of 1.0753. More upside will be confirmed if it moves above that level. If this happens, the next reference level to watch will be at 1.0800 (February 14 high).
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