Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1025.
- Add a stop-loss at 1.0850.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0875 and a take-profit at 1.0800.
- Add a stop-loss at 1.0950.
The EUR/USD pair retreated slightly ahead of the upcoming US building permit and housing starts numbers. It dropped to a low of 1.0915, a few points below this week’s high of 1.0967. Last week’s high was the highest point since May 12th.
Building permits and housing starts
The EUR/USD pair has been in a strong bullish trend in the past few days after the European Central Bank (ECB) and the Federal Reserve decisions. The two banks diverged in their decisions, with the ECB hiking interest rates by 0.25%. For its part, the Fed decided to leave interest rates and its quantitative tightening policies unchanged.
The only important data to watch will be from the United States. The US will publish the latest building permits and housing starts data. Economists expect the data to show that the housing starts dropped from 2.2% to -0.8% in May. Precisely, they expect that starts dropped from 1.401 million in April to 1.40 in May.
Meanwhile, they expect that the building permits rose from 1.147 million in April to 1.42 million in May. While these numbers are important, they will have minimal impact on the EUR/USD pair since the Fed has already made its decision.
The other important catalyst for the EUR/USD pair will be a statement by John Williams, the head of New York’s central bank. Williams has been one of the most hawkish central bank officials.
Jerome Powell, the Federal Reserve Chair, will testify in Capitol Hill, where he will provide more information about interest rates. He will also talk about the future of inflation and its quantitative tightening.
EUR/USD technical analysis
The EUR/USD pair retreated slightly on Monday in a low-volume environment since US markets were closed. It dropped to a low of 1.0920, a few points below this month’s high of 1.0964. It remains slightly above the 25-day moving average while the Relative Strength Index (RSI) moved below the oversold level.
The stochastic oscillator has also retreated while the price has dropped below the 23.6% retracement level. Therefore the pair will likely have a bullish breakout as buyers target the next key resistance point at 1.100. A drop below the psychological level at 1.0900 will invalidate the bullish view.
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