Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0900.
- Add a stop-loss at 1.1045.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0975 and a take-profit at 1.1050.
- Add a stop-loss at 1.0900.
The EUR/USD price retreated last week as concerns about European energy resumed. The pair dropped to a low of 1.0945 on Friday, down from last week’s high of 1.1067. It has slipped by almost 3% from its July high while the US dollar index (DXY) has rebounded.
Europe’s inflation concerns
The EUR/USD pair has been under pressure after fresh concerns about European inflation continued. This happened as natural gas prices surged last week after a threat of strike by workers in Australian energy workers. That was a vital move since Australia has become a leading provider of LNG to Europe.
LNG prices have now retreated as talks to avert the strike continued. As such, the market is concerned that rising energy prices will have a negative impact on inflation and put the European Central Bank (ECB) under pressure. Therefore, traders will continue watching trends in Europe’s gas prices this week.
The EUR/USD pair also retreated after the US published mixed inflation data. The report revealed that the headline and core inflation figures dropped in July from the previous month. Core CPI dropped to 4.7% on a YoY basis.
Therefore, analysts have a mixed outlook for the Fed in the coming months. Some analysts, including those from ING and Rabobank, believe that the inflation figure boosted the case for no further rate hike this year.
There will be several important catalysts for the EUR/USD pair this week. First, the US will publish important economic numbers, including retail sales, building permits, and housing starts.
The most important report will be minutes by the Federal Open Market Committee (FOMC). These minutes, which will come out on Wednesday, will provide more information about the deliberations that happened during the last meeting.
Second, in Europe, Eurostat will publish the latest consumer and producer inflation numbers on Wednesday.
EUR/USD technical analysis
The EUR/USD pair slipped slightly on Monday morning, continuing the downward trend that started on Thursday. It dropped to a low of 1.0948, lower than last week’s high of 1.1064. The pair has crossed the 25-period moving average and moved below the key resistance level at 1.1043.
It has also moved flipped the 50% Fibonacci Retracement level into a resistance. Therefore, the pair will likely continue falling as sellers target the key support level at 1.0900. The stop-loss of this trade will be at 1.100.
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