Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0600.
- Add a stop-loss at 1.0700.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0660 and a take-profit at 1.0725.
- Add a stop-loss at 1.0600.
The EUR/USD exchange rate remained in a tight range as traders focused on the next actions by the European Central Bank (ECB) and the Federal Reserve. It was trading at 1.0650 on Tuesday morning, a few points above last week’s low of 1.0600.
Key economic numbers ahead
The EUR/USD pair moved sideways as a risk-on sentiment prevailed. US equities surged on Monday, with the Dow Jones, S&P 500, and Nasdaq 100 indices jumping by over 1%.
In the commodities market, the price of crude oil continued pulling back, with Brent and West Texas Intermediate (WTI) dropping to $86.85 and $81.7, respectively. Other commodities like gold, silver, and copper pulled back sharply on Monday.
The outlook for the EUR/USD pair will be the upcoming flash manufacturing and services PMI numbers from the US and Europe. In Europe, the figures are expected to come in at 46.5 and 51.8, respectively.
Elsewhere, in the United States, the figures are expected to come in at 52.0 and 52.1, respectively. If these numbers are correct, they will signal that the country’s economy is doing well. The US is in a strong recovery, helped by the trillions of dollars in stimulus by the Trump and Biden administrations.
The other important economic numbers to watch will be the upcoming new home sales and building permit figures. Economists polled by Reuters expect the data to show that sales rose to 668k and 1.48 million, respectively.
These numbers are coming at a time when there are hopes that the ECB will start cutting interest rates in June. Officials, however, have diverged on what to do after the June rate cut, with some expecting additional cuts later this year.
The US, on the other hand, is expected to maintain rates at a 23-year high as the reflation process continues. Some officials even believe that the Fed will deliver another rate hike if inflation remains stubbornly high.
EUR/USD technical analysis
The EUR/USD pair has remained in a consolidation phase in the past two days. It was trading at 1.0650, higher than last week’s low of 1.0600. The pair is consolidating at the 50-period and 25-period Arnaud Legoux Moving Averages (ALMA).
At the same time, the Relative Strength Index (RSI) and the MACD indicators have formed a bullish divergence pattern. The RSI has already moved to the neutral point of 50.
Meanwhile, the pair has also formed a bearish flag pattern, which is a popular continuation sign. Therefore, the likely scenario is where it continues to consolidate inside this pattern and then has a bearish breakout to last week’s low of 1.0600.
Ready to trade our daily Forex signals? Here’s a list of some of the top 10 forex brokers in the world to check out.