Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0700.
- Add a stop-loss at 1.0920.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0825 and a take-profit at 1.0915.
- Add a stop-loss at 1.0780.
The EUR/USD exchange rate reacted mildly to the first Fed minutes of the year and as traders refocused on the upcoming European inflation and PMI numbers. It was trading at 1.0822, where it has been stuck at in the past few days. This price is substantially higher than this month’s low of 1.0693.
European inflation and PMI numbers
The Federal Reserve published minutes of the last meeting on Wednesday. These minutes revealed that most officials remained cautious about cutting interest too soon since inflation remains much higher than the 2% target.
Before the meeting, economic numbers were showing that inflation was moving in the right direction. However, recently, numbers have shown that inflation remains stubbornly high. The most recent data showed that the headline CPI rose to 3.1% in January while core CPI rose to 3.8%.
Therefore, most market participants have ruled out cutting interest rates in March as they were expecting a few months before that. Most of them expect the Fed will start cutting rates either in its meeting in May or June.
The EUR/USD pair will have several key events on Thursday. One of the most important ones is the January inflation report. Economists expect the data to show that the headline CPI dropped by 0.1% in January leading to a YoY increase of 2.8%.
Core inflation, on the other hand, is expected to drop by 0.9% on a MoM basis and by 3.3% on a YoY basis. These numbers mean that Europe’s economy will move to the 2% target in the coming months.
The other key data will come from S&P Global, which will publish the latest services and manufacturing PMI numbers. Economists expect the data to reveal that the bloc’s manufacturing PMI rose to 47 while the services PMI rose slightly to 48.8.
In the US, economists believe that the two rose to 50.5 and 52.4, respectively. The other important data will be the latest existing home sales numbers.
EUR/USD technical analysis
The EUR/USD exchange rate has drifted upwards in the past few days. It has moved slightly above the key resistance point at 1.0805, the highest swing on February 12th. The pair has risen above the 23.6% retracement point.
Further, the 25-period and 50-period moving averages have made a bullish crossover. The pair has also formed a rising wedge pattern, which is a bearish sign. This wedge is nearing the confluence level. Therefore, the pair will likely have a bearish breakout in the coming days, with the next point to watch being at 1.0700.
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