Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1150.
- Add a stop-loss at 1.0950.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 1.1000 and a take-profit at 1.0900.
- Add a stop-loss at 1.1150.
The EUR/USD price jumped to the highest point in months after the latest interest rate decision by the Federal Reserve. It rose to a high of 1.1065 ahead of the upcoming European Central Bank (ECB) decision. It has soared by over 16% above the lowest point in 2022.
Fed and ECB rate decisions
The Federal Reserve concluded its monetary policy meeting on Wednesday and decided to hike interest rates by 0.25% as was widely expected. It lifted rates to the range of 5%-5.25%, the highest level in decades. This decision was unanimous. Analysts believe that the Fed decided to hike rates in the current market environment to avoid panic in the market.
The Fed hinted that it will end the tightening phase by saying that it will take into account several factors in determining the extent of the next rates. Also, the bank noted that it will continue with its quantitative tightening policy by shrinking its balance sheet by about $95 billion per month. $60 billion of these are in Treasuries while $35 billion are in mortgage-backed securities.
The decision came at a difficult period for the American economy. Inflation remains sticky as the labor market strengthens. Data published on Wednesday by ADP showed that payrolls in the United States jumped to 296k in April after rising by 142k in March. Wages remained under pressure.
The Fed is also contending with the challenges in the commercial real estate and banking sectors. Earlier this week, First Republic Bank became the second-biggest American bank to collapse and other regional bank stocks have all retreated.
The next important EUR/USD will be the upcoming decision by the European Central Bank (ECB). Like the Fed, the ECB is expected to hike interest rates by 025% and point to more increases. Preliminary data published on Tuesday showed that the European inflation numbers remained at an elevated level.
EUR/USD technical analysis
The EUR/USD pair has been in a strong bullish trend in the past few days. It has jumped from March’s low of 1.0520 to a high of 1.1098. The pair has managed to move above the key resistance point at 1.1030, its highest point on February 2nd. It is also at the overshoot level of the Murrey Math Lines while the Relative Strength Index (RSI) has continued rising.
Therefore, the pair will likely continue rising ahead and after the ECB decision. If this happens, the next level to watch will be at 1.1150.
Ready to trade our free trading signals? We’ve made a list of the top 10 forex brokers in the world for you to check out.