Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0960.
- Add a stop-loss at 1.1075.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1048 and a take-price at 1.1100.
- Add a stop-loss at 1.0970.
The EUR/USD exchange rate was flat on Monday morning as traders continued to reflect on last week’s decisions by the European Central Bank (ECB) and the Federal Reserve. The pair was trading at 1.1018, a few points above last week’s low of 1.0945.
ECB and Fed decisions
The EUR/USD pair was in focus last week as the Fed and the ECB delivered their interest rate decisions. The two central banks decided to hike interest rates by 0.25% in a bid to fight the stubbornly high inflation.
Still, there are signs that the hiking cycle is about to end since inflation is falling. On Friday, data from the US revealed that the personal consumer expenditure (PCE) index came in at 3.1% in June while core PCE fell to 4.1%. The PCE is an important figure since it is the one that Fed focuses on.
Therefore, analysts believe that the Federal Reserve and the ECB will likely pause their rate hikes in the next few months.
The next key catalyst for the EUR/USD pair will be the upcoming German import price index and retail sales numbers. Economists believe that the import price index dropped by 14.7% in June after falling by 9.1% in the previous month. Germany is also expected to publish weak retail sales numbers.
These economic numbers are expected to confirm that the European economy is slowing. The other important data to watch will be the preliminary European consumer price index (CPI) data. Economists polled by Reuters expect the data to show that the headline CPI dropped from 5.5% in June to 5.3% in July.
Core CPI is expected to have dropped from 5.5% to 5.4%. While these inflation numbers are important, their impact will likely be limited since they will come a few days after the ECB decision.
EUR/USD technical analysis
The EUR/USD price made a bearish breakout after the Fed and ECB decision. It flipped the important support level at 1.1073 into a resistance. This was an important level since it was the highest point in April this year. It has also moved below the 50-period moving average and is between the middle and lower lines of the Bollinger Bands.
Therefore, the pair will likely resume the downward trend, with the next important reference level being at 1.0950. The stop-loss of this trade will be at 1.1075.
Ready to trade our daily Forex signals? Here’s a list of some of the top 10 forex brokers in the world to check out.