Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0850.
- Add a stop-loss at 1.0690.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0715 and a take-profit at 1.0600.
- Add a stop-loss at 1.0825.
The EUR/USD pair moved sideways on Monday ahead of the busiest week of the month. The pair was trading at 1.0753 on Monday morning, a few points above last week’s low of 1.0645. It had a relatively muted performance last week because the economic calendar had no major events.
Federal Reserve decision and US inflation data
Forex traders are bracing for a relatively busy market week as the US publishes key data and as the Federal Reserve. The Bureau of Labor Statistics will publish the latest US inflation data on Tuesday morning.
Economists believe that the data will show that America’s inflation continued dropping in May as energy prices dropped. The median estimate is that the headline CPI dropped from 0.4% in May to 0.3%. They expect that the CPI dropped from 4.9% to 4.1%.
Core inflation, which excludes the volatile food and energy prices, is expected to have remained unchanged at 0.4%.
These numbers will come shortly before the Federal Reserve starts its meeting. It will then deliver its decision on Wednesday. Most analysts believe that the Fed will decide to leave interest rates unchanged for the first time in 10 meetings. The pause will likely be a hawkish one, where the bank will warn of another hike if inflation remains high.
The other important data will be the latest American retail sales numbers scheduled for Friday. While important, these numbers will have no major impact on the EUR/USD pair since they will come after the Fed decision.
Meanwhile, the European Central Bank (ECB) will conclude its two-day meeting on Thursday. Unlike the Fed, analysts believe that the bank will hike interest rates by 0.25% to 3.50%. The view is that the bloc’s inflation remains stubbornly high and that interest rates have more room to run.
EUR/USD technical analysis
The EUR/USD pair was muted last week because the calendar had no major data and Federal Reserve speakers. It found strong resistance at 1.0782, where it failed to move above on June 2 and June 8. On the 4-hour chart, it has moved slightly above the 25-period and 50-period moving averages.
The MACD and the Relative Strength (RSI) indicators have formed a bullish divergence pattern. Therefore, there is a likelihood that the pair will have a bullish breakout in the coming days. This view will be confirmed if it moves above the key resistance point at 1.0782.
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