Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0743.
- Add a stop-loss at 1.0945.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0900 and a take-profit at 1.100.
- Add a stop-loss at 1.0800.
The EUR/USD exchange rate erased gains made on Monday despite the weak US retail sales numbers. It dropped to a low of 1.0857 after Federal Reserve’s Tom Barkin warned that the Fed could continue hiking rates if inflation remains stubbornly high.
Barkin’s hawkish statement
In a statement on Tuesday, Richmond Fed’s Thomas Barkin said that he was comfortable with more rate hikes if inflation remains stubbornly high. He also said that more hikes will hinge on the health of the financial sector.
Analysts believe that the Fed has ended its rate hikes after pushing them to the highest level in more than a decade. Besides, the latest economic data shows that consumer and producer inflation is falling. The headline CPI has fallen in several straight months and currently stands at 4.9%.
At the same time, there are signs that the economic growth is slowing. Data published on Tuesday showed that the country’s retail sales grew at a slower pace in April. This is an important figure since retail sales are a good measure of consumer spending.
The EUR/USD declined even after the positive economic data from Europe. According to Eurostat, the bloc managed to move to a trade surplus in March as the economy did well. The bloc’s trade surplus jumped to over 25.6 billion euros, higher than the previous 3.7 billion euros.
Most European countries are expected to do well, helped by low energy prices. Data published on Tuesday showed that the bloc’s GDP grew by 1.3% in the first quarter.
The EUR/USD pair will react to the latest European consumer price index (CPI) data. Based on the preliminary numbers, economists expect that headline consumer inflation dropped from 0.9% to 0.7% while core CPI fell from 1.3% to 1.0%.
EUR/USD technical analysis
The EUR/USD pair retreated and has been in a strong bearish trend in the past few days. It has moved below the important support at 1.0945, the lowest point on May 2. The pair has moved below the 25-day moving average and the 38.2% Fibonacci Retracement level. Further, the MACD and the awesome oscillator have moved below the neutral point.
Therefore, the pair will likely continue falling in the coming days as sellers target the 61.8% retracement point at 1.0743. This view will be confirmed if the price drops below Friday’s low of 1.0843.
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