Bullish view
- Set a buy stop at 1.1948 (slightly above Monday’s high).
- Add a take profit at 1.1990 (61.8% Fibonacci retracement).
- Add a stop loss at 1.1900.
Bearish view
- Set a sell-stop at 1.1908 (middle Bollinger Bands).
- Set a stop loss at 1.1870 and a take-profit at 1.1950.
The EUR/USD declined slightly as the market continued to focus on the US bond market ahead of key auctions scheduled for later this week. It is also reacting to a new US $3 trillion spending plan and the positive statements by Jerome Powell.
$3 trillion spending plan
The EUR/USD declined after reports of a new spending plan by the Joe Biden administration. This proposal centres on roads, bridges, and other infrastructure projects. Other parts of the program will be about economic issues, including a child tax credit and tuition-free community colleges.
The grand package comes two weeks after Joe Biden signed into law a $1.9 trillion stimulus package that included $1,400 stimulus checks to individuals. In total, the Federal government has passed support programs worth about $6 trillion.
Some analysts fear that all this spending will lead to elevated US debt, which has ballooned to more than $3 trillion. They also caution that it could lead to a period of faster economic growth followed by a prolonged period of stagflation.
The EUR/USD is also reacting to a positive statement by Joe Biden. In a speech yesterday, he said that the US economy was recovering faster than expected because of the falling number of coronavirus cases, stimulus, and the ongoing vaccination drive. Still, he warned that the recovery was uneven, with many crucial sectors like hospitality and tourism suffering. He, and other Fed officials, will testify before Congress today and tomorrow.
Yesterday, the EUR/USD reacted mildly to the relatively weak existing home sales numbers from the US. In total, existing home sales fell by 6.6% to 6.22 million in February this year because of the lockdowns in some states. Later today, the Census Bureau will publish the latest new home sales numbers.
EUR/USD technical forecast
The two-hour chart shows that the EUR/USD has been in a narrow range in the past few days. It has remained between the support of 1.1870 and resistance at 1.1990, respectively. The price is slightly above the 78.6% Fibonacci retracement level of 1.1918. It is also slightly below the upper side of the Bollinger Bands. Most importantly, it has formed a pattern that looks like a small bullish flag.
Therefore, the pair may keep rising as bulls target the next 61.8% Fibonacci retracement level at 1.1987. It is also slightly below the important resistance at 1.1990. However, a decline below 1.1900 will invalidate this trend.
