Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0600.
- Add a stop-loss at 1.0750.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0695 and a take-profit at 1.0770.
- Add a stop-loss at 1.0600.
The EUR/USD exchange rate recovered slightly on Thursday morning, erasing some of the recent losses. It bottomed at 1.0600 on Wednesday and then rebounded to 1.0670 after the Eurostat released the latest inflation figures.
US dollar index retreats
The EUR/USD pair rose slightly as the recent US dollar index rally took a breather. The index pulled back to $105.75, down from this week’s high of $106.35. This retreat also coincided with a drop of crude oil and bond yields.
Brent, the global benchmark, dropped to $87.25 while the West Texas Intermediate (WTI) pulled back to $82.60. The US 10-year and 30-year bond yields also pulled back to 4.58% and 4.67%, respectively.
This price action happened after the Fed published its Beige Book, which is a survey of regional business contacts. The report showed that consumer spending barely increased as discretionaries wavered.
Meanwhile, in Europe, the Eurostat said that the bloc’s inflation moderated slightly in March. The headline Consumer Price Index (CPI) retreated from 2.6% to 2.4%. Core inflation, which excludes volatile products, retreated from 3.1% to 2.9%.
Still, there are concerns that the bloc will have reflation because of the ongoing crisis in the Middle East. Reflation is happening in some countries that had beaten inflation like in the US.
The EUR/USD also reacted to a statement by Christine Lagarde, the head of the ECB. In it, she said that the bloc was making some progress in its recovery. She hopes that the bank will start cutting interest rates in its June meeting.
There will be no major economic numbers from Europe on Thursday. As such, traders will focus on the upcoming statements by Fed officials like Raphael Bostic, John Williams, and Michele Bowman. These statements will provide more information about when the Fed will start cutting rates.
EUR/USD technical analysis
The EUR/USD pair has bounced back after bottoming at 1.0600 on Wednesday. It has formed a break and retest pattern by moving back to 1.0695, its lowest swing on February 14th.
The pair has now formed a small, rounded bottom while the Relative Strength Index (RSI) and the MACD have pointed upwards. The RSI is nearing the neutral point of 50.
Meanwhile, the three lines of the Bollinger Bands have narrowed. Therefore, the outlook for the pair is bearish, with the next target being this week’s low of 1.0600.
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