Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1100.
- Add a stop-loss at 1.0960.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 1.1011 and a take-profit at 1.0950.
- Add a stop-loss at 1.1110.
The EUR/USD exchange rate slipped to the lowest level since July 12 as investors waited for the upcoming Fed and ECB interest rate decisions. The pair retreated to a low of 1.1017, sharply lower than the year-to-date high of 1.1275.
Fed and ECB decisions ahead
The EUR/USD pair retreated as traders focused on the upcoming Fed and ECB decisions. It dropped amid rising concerns that the European Central Bank will point to a pause when it delivers its decision on Thursday.
A survey of European banks showed that many of them were struggling to attract borrowers since interest rates have risen to the highest level in years. Higher interest rates are designed to slow the economy and lower inflation. As a result, recent surveys show tht business and consumer confidence are in the negative area.
The EUR/USD pair retreated after the strong economic numbers from the US. Data published by the Conference Board showed that America’s consumer confidence rose to a two-year high of 117 in July, higher than the expected 111.8.
Consumer confidence soared as inflation dropped and expectations of a recession dwindled. The most recent numbers showed that the country’s inflation dropped to 3.0% while the unemployment rate fell to 3.6%.
Another set of data showed that the house price index (HPI) held quite well in May as inventries fell. The US will release the new home sales numbers later on Wednesday. Still, the main news that will have an impact on the pair will be the latest Fed decision.
Economists, based on the recent statements by Fed officials, believe that the Fed will hike by a quarter of a percentage point. The bank has been quite aggressive in the past few months in a bid to fight the elevated inflation.
EUR/USD technical analysis
The EUR/USD pair has been in a strong bearish trend after peaking at 1.1250 last week. It has retreated below the key support level at 1.1096, the highest point in May this year. The pair also slipped below the 25-period moving average.
Meanwhile, the Klinger Oscillator continued slumping while the Relative Strength Index (RSI) dropped below the oversold level. Therefore, the pair will likely bounce back as traders buy the dip. This rebound could see it rise to 1.1100.
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