Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0975.
- Add a stop-loss at 1.0725.
- Timeline: 1-3 days.
Bearish view
- Set a sell-stop at 1.0845 and a take-profit at 1.0725.
- Add a stop-loss at 1.0925.
The EUR/USD exchange rate wavered on Wednesday morning ahead of the upcoming US consumer inflation and Federal Reserve minutes. It was trading at 1.0850, higher than this month’s low of 1.0725.
US inflation data and FOMC minutes ahead
The EUR/USD pair has rebounded in the past few days even as some analysts hint at a drop to the parity level. Analysts at Bank of America and LBBW believe that the pair has more downside in the coming months.
The main reason for this is that analysts expect that the European Central Bank (ECB) will start cutting interest rates earlier than the Fed. That’s because Europe’s inflation is nearing the bank’s target of 2.0%. The bank will provide hints on when it will start cutting rates in its meeting this week.
There will be no economic data and news from Europe on Wednesday. Instead, focus will be on the upcoming US inflation data.
Economists polled by Bloomberg expect the report to show that the headline Consumer Price Index (CPI) rose by 0.3% in March, translating to a YoY increase of 3.4%. Core inflation is expected to come in at 0.3% MoM and 3.7% on a YoY basis.
If these numbers are correct, it means that inflation has remained stubbornly high. It will also be a sign that the recent disinflation trend has ended. As a result, it will signal that the Federal Reserve will maintain interest rates for longer.
In a statement on Monday, Jamie Dimon, the head of JP Morgan warned that interest rates could remain higher for longer. He expects that rates could even push to 8% since the economy is doing well.
The next important EUR/USD news will be the upcoming Fed minutes. These minutes will provide more information about what the Fed officials deliberated in the last meeting.
EUR/USD technical analysis
The EUR/USD exchange rate has remained in a consolidation phase in the past few days. It was trading at 1.0855, higher than this month’s low of 1.0725. On the daily chart, the pair is consolidating at the 50-day and 25-day Weighted Moving Averages (EMA).
The pair has moved to the strong, pivot and reverse point of the Murrey Math Lines while the histogram of the Percentage Price Oscillator (PPO) has moved above the neutral point. Also, the Relative Strength Index (RSI) has moved above the neutral point.
Most importantly, it has formed a double-bottom pattern. Therefore, the outlook is bullish, with the next point to watch being at 1.0975, its highest swing on March 8th. A break below the support at 1.0725 will point to more downside.
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