Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0835.
- Add a stop-loss at 1.0955.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0925 and a take-profit at 1.1000.
- Add a stop-loss at 1.0850.
The EUR/USD pair popped sharply as traders embraced a risk-on sentiment after the Federal Reserve decision. The euro jumped to a high of 1.0915, its highest point since March 14th. It has risen by 70 basis points from its lowest point this week.
Risk-on sentiment
The EUR/USD pair rose after the Federal Reserve left the door open for three rate cuts this year even as inflation remains stubbornly high.
The bank maintained interest rates unchanged and hinted that it would start cutting rates in June. Most analysts were expecting the Fed to change its outlook since inflation remains much higher than the 2% target.
Inflation rose to 3.1% in February while the core price index jumped to 3.8%. It has jumped sharply because of the rising energy and services inflation.
The risk-on sentiment was evidenced by the falling US dollar. The index crashed by 35 basis points to $103.15. On the other hand, US bond yields retreated while the Dow Jones and Nasdaq 100 indices jumped to record highs.
Looking ahead, there will be some important economic numbers from Europe and the United States. Eurostat will publish the latest current account figure. The expectation is that the current account rose to 32.3 billion euros in February.
The other important report will be delivered by S&P Global, which will publish the flash manufacturing and services PMI figure from Europe and the US. Economists polled by Reuters expect that the bloc’s manufacturing PMI rose from 46.5 in January to 47 in February. They also expect that the services and composite PMI will rise to 50.5 and 49.7, respectively.
In the US, the flash manufacturing and services PMI figure is expected to come in at 51.8 and 52.0, respectively. The other important data to watch will be the country’s existing home sales and the Philadelphia manufacturing index.
Still, these numbers will not have a big impact on the EUR/USD pair since the Fed and the ECB have already made their decisions.
EUR/USD technical analysis
The EUR/USD pair bounced back after the Federal Reserve decision. Before the rebound, the pair had formed a small double-bottom pattern at 1.0834. This pattern is usually a sign of a bullish reversal.
The pair has moved slightly above the 50-period moving average and retested the lower side of the ascending channel. This could be a sign of a break and retest pattern. Also, the two lines of the MACD have moved below the neutral point.
Therefore, the pair may resume the downward trend since it has formed a break and retest pattern. If this happens, the next point to watch will be at 1.0835.
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