Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.100.
- Add a stop-loss at 1.0885.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0915 and a take-profit at 1.0850.
- Add a stop-loss at 1.1050.
The EUR/USD exchange rate continued rising last week after the European Central Bank (ECB) decision and the US non-farm payrolls (NFP) data. It soared to a high of 1.0980, its highest swing since January 12th.
US inflation data ahead
The EUR/USD had a big week as the ECB delivered its second decision of the year. In it, the bank decided to leave interest rates intact at the all-time high of 4.0%. It believes that inflation is still stubbornly high and that higher rates are needed for a while.
Still, the bank left the door open for a rate cut either in May or June. That cut will be needed because the European economy is in turmoil as some important economies remain in a recession. Germany has has contracted in the past two straight quarters, with most companies complaining about the state of interest rates.
Meanwhile, the EUR/USD pair reacted to the two-day testimony by Jerome Powell, the head of the Federal Reserve. On his first day of testimony, he said that the Fed was confident that inflation is moving in the right direction.
As such, the Fed expects that rate cuts will happen either in June or May. Besides, there are signs that the American economy was slowing. Recent data revealed that consumer confidence tumbled in February. Durable goods and industrial production have also tumbled.
Friday’s jobs report also confirmed that the labor market was cooling. The unemployment rate rose from 3.7% in January to 3.9%. Wage growth rose by 0.1% (MoM) and 4.3% YoY, lower than the median estimate of 0.2% and 4.4%.
The Bureau of Labor Statistics also delivered a downward revision to its previous jobs report. It showed that the economy created 229k jobs in January, down from the previous estimate of 353k.
Looking ahead, the key EUR/USD news this week will be a meeting by European leaders and US inflation numbers set for Tuesday. Economists expect the figure to show that the headline CPI rose by 3.1% in February.
EUR/USD technical analysis
The EUR/USD pair continued its bullish trend last week. As it rose, it jumped above the key resistance point at 1.0916, the neckline of the inverse head and shoulders pattern. It also flipped the descending trendline into a support.
The pair moved above the 50-period moving average and approached the crucial resistance at 1.100, its highest point on January 11th. Therefore, the outlook for the pair is bullish, with the next reference level to watch being at 1.100. A break above that level will open the possibility of it jumping to 1.1137, its highest level in December last year.
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