Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0750.
- Add a stop-loss at 1.0875.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0815 and a take-profit at 1.0900.
- Add a stop-loss at 1.0750.
The EUR/USD exchange crashed to its lowest point since March 1st as the US dollar index rebounded after a series of important central bank decisions. The pair approached the important support level at 1.0800, dropping by over 1.50% from its highest point this month.
US inflation and consumer confidence
The EUR/USD pair retreated as the market reflected on the recent European Central Bank (ECB) and Federal Reserve interest rate decisions.
The ECB left rates unchanged in its meeting this month. In a statement last week, Christine Lagarde predicted that the bank would start cutting rates in June but reiterated that the bank needed to see more evidence that inflation was falling.
Her biggest concern is that the bloc was having high wage inflation and low productivity, meaning that service inflation will continue rising for a while.
Meanwhile, the Federal Reserve delivered a dovish pause in which the dot plot pointed to three rate cuts, with the first one set to start in June.
Some economists were expecting the Fed to sound more hawkish than in the past meetings because of the recent inflation trends. The headline and core inflation figures have remained above 3% for a while.
Worse, there are signs that the price of most services is not falling at a fast pace than expected. Recently, however, gasoline prices have continued rising as the price of crude oil sits at its highest point in four months.
Looking ahead, the EUR/USD pair will be impacted by several economic numbers from the US and Europe. The Conference Board will publish the latest consumer confidence report on Tuesday. This will be a crucial report because confidence has slumped hard in the past few months.
The US will also publish the Personal Consumer Expenditure (PCE) report, which is the Fed’s favorite inflation gauge. In Europe, several countries like France and Germany will release their preliminary inflation numbers.
EUR/USD technical analysis
The EUR/USD exchange rate peaked at 1.0980 earlier this month and has crashed hard to the support at 1.0800. On the 4H chart, the pair has moved to the 23.6% Fibonacci Retracement level and the key support at 1.0835, its lowest swing on Thursday.
The pair has crossed the 50-period moving average while most momentum oscillators like the MACD and the Relative Vigor Index (RVI) are trending downwards. Therefore, a clear break below 1.0800 will point to more downwards, with the next reference point being at 1.0750.
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