Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0810.
- Add a stop-loss at 1.0745.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and a take-profit at 1.0730.
- Add a take-profit at 1.0800.
The EUR/USD rate drifted upwards on Tuesday even after some encouraging European inflation numbers. It also rebounded after the important statements from Mary Daly and Loretta Mester who are Federal Reserve officials. It rose to 1.0778 on Wednesday morning, up from the weekend low of 1.0725.
European inflation is easing
There are signs that Europe’s inflation is easing at a faster pace than in the United States. A report by the German statistics agency showed that the country’s inflation rose by just 0.4% in March, lower than the median estimate of 0.5%.
The German inflation rose to 2.3% in March after rising by 2.7% in the previous month. That increase was also lower than the expected 2.4%. These numbers mean that the ECB is achieving its inflation target. For example, in Italy, the headline CPI rose to 1.3% in March, much lower than its pandemic high of 11.8%.
Eurostat, the European statistics agency, will publish the preliminary March inflation report on Wednesday. Economists expect the data to show that the bloc’s inflation retreated from 2.6% in February to 2.5% in March. Core inflation is expected to drop to 3.0%.
Therefore, there is a possibility that the ECB will start cutting interest rates earlier than the Fed since the European economy is not doing well. A report by S&P Global showed that the manufacturing sector remained in a contraction zone in March.
Meanwhile, Mary Daly and Loretta Mester said that the Fed would start cutting rates later this year if the data is supportive. Daly expects the bank to deliver three cuts as the officials signalled in the last monetary policy meeting.
The EUR/USD pair will next react to a statement by Jerome Powell and the upcoming ISM non-manufacturing PMI report.
EUR/USD prediction
The EUR to USD pair formed a small doji pattern on Tuesday, triggering a strong comeback that erased most of the Monday losses. Still, on the 4H chart, the pair has remained below the 50-period Exponential Moving Average (EMA).
It also remained below the Woodie pivot point level at 1.0800. The Klinger Oscillator has pointed upwards. Therefore, the pair will likely continue rising on Wednesday ahead of the Jerome Powell statement.
If this forecast is accurate, the pair will likely rise and retest the Woodie pivot at 1.0810 and then resume the recent downtrend.
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