Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.100.
- Add a stop-loss at 1.085.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0880 and a take-profit at 1.0800.
- Add a stop-loss at 1.100.
The EUR/USD pair rally gained steam after the US and Germany published mixed economic numbers. After falling to a low of 1.0773 on August 25th, the pair soared to a high of 1.0941.
Fed pause likely
Economic data from the United States showed pointed to a likelihood that the Federal Reserve will pause its rate hikes in September. On Tuesday, numbers by the Conference Board revealed that the country’s consumer confidence dropped from 117 in July to 106 in August.
A separate report by the Bureau of Labor Statistics (BLS) revealed that the labor market was softening as the number of job vacancies dropped to the lowest level since 2021. This fear was confirmed by a report by ADP on Wednesday, which showed that the private sector added just 177k jobs in August.
Meanwhile, the US economy expanded at a slower pace than expected. The GDP expanded by 2.1% in Q2, lower than the median estimate of 2.4%. The US trade deficit also widened to over $91.1 billion in July.
These numbers raise the possibility that the Federal Reserve will pause its rate hikes in its September meeting. In his statement at the Jackson Hole Symposium, Jerome Powell warned that the bank could continue hiking interest rates since inflation remained stubbornly high.
The EUR/USD pair also rose after the relatively stronger-than-expected German inflation numbers. According to the statistics agency, the German consumer price index (CPI) rose by 6.1% in August, higher than the median estimate of 6.0%. Core inflation rose by 5.5%, pushing bund yields higher.
The key economic numbers to watch on Thursday will be the preliminary European inflation and US PCE. The latter figure is the most important inflation gauge that the Federal Reserve focuses on.
EUR/USD technical analysis
The 4H chart shows that the EUR/USD exchange rate has been in a strong bullish trend in the past few days. As it rose, the pair moved above the upper side of the descending channel. The 25-period and 50-period moving averages have made a bullish crossover while the Relative Strength Index (RSI) has moved close to the overbought level.
Therefore, the pair will likely continue rising as buyers target the key resistance level at 1.100, the highest point on June 22nd. The stop-loss of this trade will be at 1.0870.
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