Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1100.
- Add a stop-loss at 1.1300.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1215 and a take-profit at 1.1300.
- Add a stop-loss at 1.1115.
The EUR/USD was flat on Thursday as traders reacted to the latest American housing and European consumer inflation numbers. The pair was trading at the important psychological support at 1.1200, a few points below last week’s high of 1.1276.
Weak US data
The US has published a series of weak economic numbers this month. It started with the country’s jobs numbers, which showed that the economy added just 209kn jobs in June this year. Analysts were expecting 230k jobs while the ADP report showed that the country added over 400k jobs.
The other important data came out last week when the US published weak inflation numbers. The headline consumer inflation data dropped to 3.0% in June while core inflation fell to 4.8%. While these numbers are encouraging, they also point to weaker demand in the economy.
On Tuesday, data showed that the country’s retail sales dropped in June even as prices dropped. Capacity utilization, industrial, and manufacturing production dropped in June even as the government provided incentives to companies.
Meanwhile, data published on Tuesday revealed that the housing sector is losing momentum. Building permits dropped to 1.44 million while housing starts fell by 8% to 1.43 million. The two figures had jumped sharply in the previous month.
These numbers mean that the Fed has a narrow room to hike interest rates in the coming meetings. I expect it to hike by 0.25% in June and then take a strategic pause for the rest of the year as it tries to engineer a soft landing.
Meanwhile, European data showed that inflation is still a big challenge in the region. The headline and core consumer price index (CPI) rose by 0.3% and 0.4%, respectively. They both rose by 5.5% on a YoY basis, much higher than the ECB target of 2.0%.
EUR/USD technical analysis
The EUR/USD pair retreated slightly after the weak US economic numbers. On the four-hour chart, the pair moved to the weak stop and reverse level of the Murrey Math Lines tool. It also retested the important psychological support at 1.1200 while the Relative Strength Index (RSI) moved below the neutral point at 50.
Therefore, the outlook for the pair is still bearish, with the next level to watch being at 1.1086, the highest point in April this year.
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