Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0885.
- Add a stop-loss at 1.0790.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0825 and a take-profit at 1.0750.
- Add a stop-loss at 1.0925.
The EUR/USD rose slightly on Monday as traders refocused on the upcoming European Central Bank (ECB) decision and key US economic numbers. The pair was trading at 1.0840, a few pips above last week’s low of 1.0797.
ECB decision and NFP data
The EUR/USD pair inched upwards after last Friday’s European inflation and US PMI numbers. In a report, Eurostat noted that the bloc’s inflation rose from minus 0.4% in January to 0.6% in February. It then cooled from 2.8% to 2.6% from the same period in 2023.
Core inflation rose from minus 0.9% to 0.7% leading to a YoY increase of 3.1%. These numbers mean that the bloc’s inflation is still much higher than the bank’s target of 2.0%. Most of these gains are happening because of the rising energy and services prices.
Inflation in some countries has already moved below the ECB target. In Italy, the headline CPI dropped to 0.8% YoY in February.
The inflation report came as the ECB prepares to deliver its second interest rate decision of the year. Economists polled by Reuters expect the bank to maintain rates unchanged at a record high of 4.0%.
Nonetheless, there are signs that the bank will point to a rate cut in the first half of the year. That’s because inflation is moving in the right direction while some crucial countries in the bloc are already in a recession.
Recent data showed that Germany, the biggest economy in Europe, has moved into a recession. Further, manufacturing and industrial activity in the country has continued contracting, partly because of high interest rates.
The other important driver for the EUR/USD pair will be the US non-farm payrolls (NFP) data scheduled for Friday. These numbers will likely show that the economy continued adding jobs in February as the unemployment rate remained low.
There are signs that the US economy is slowing, which could also trigger the Fed to deliver three rate cuts this year. Durable goods, consumer confidence, and the ISM manufacturing PMI numbers were weaker-than-expected.
EUR/USD technical analysis
The EUR/USD exchange rate drifted upwards after testing the crucial support level at 1.0797. On the 4H chart, it has flipped the 25-period and 50-period moving averages. It has also formed an inverse head and shoulders pattern and is nearing its neckline.
Also, the Percentage Price Oscillator (PPO) has moved to the neutral point. It has also moved slightly above the Woodie Pivot Point. Therefore, the outlook for the EUR/USD pair is bullish as long as it moves above the slanting neckline. If this happens, the next reference level will be at 1.0885, the first resistance of the pivot point.
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