Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0945.
- Add a stop-loss at 1.0870.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0885 and a take-profit at 1.0800.
- Add a stop-loss at 1.0975.
The EUR/USD exchange rate continued its strong uptrend after Jerome Powell commented on inflation and interest rate cuts. It also jumped as traders waited for the upcoming European Central Bank (ECB) decision. It soared to a high of 1.0916, its highest point since January 2024.
ECB rate decision ahead
The EUR/USD pair jumped amid a broader US dollar weakness. The closely-watched US dollar index (DXY) retreated by almost 50 basis points to $103.27. This price action happened as Jay Powell testified in Congress.
In a statement, the Fed Chair insisted that the bank was still studying trends in US inflation before determining when to cut rates. The Fed wants to see more evidence that inflation was moving to its 2% target.
Recent data showed that the PCE inflation gauge dropped to 2.4% YoY in January. It rose by 0.3% on a MoM basis. On the other hand, the headline and core Consumer Price Index (CPI) rose 3.4% and 3.8% during the month.
The Fed Rate Monitor tool estimates that the Fed will deliver its first interest rate cut in June this year. Economists expect at least three cuts, lower than the six that they were expecting a few months ago.
The next important EUR/USD news will be the upcoming ECB decision. The consensus view is that the bank will leave interest rates unchanged at 4.0% since inflation remains above its 2% target.
Some economists believe that the Fed should provide hints that it will start to cut rates soon. European inflation is quickly approaching the 2% target while some key countries are still in a recession.
The ECB decision will be followed by the upcoming US nonfarm payrolls (NFP) jobs data. Economists believe that the country’s labor market did well in February even as many big technology companies laid off their workers.
EUR/USD technical analysis
The EUR/USD exchange rate continued rising ahead of the upcoming ECB decision. It rose to a high of 1.0905, its highest point since January. Along the way, it has moved above the second resistance of the Woodie pivot point. It also jumped above the descending trendline, which was the neckline of the inverse head and shoulders pattern.
The EUR/USD pair has moved above the 50-period moving average, which is a bullish sign. Therefore, the outlook for the pair is bullish, with the next reference point being the third resistance of 1.0945.
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