Bearish View
- Set a sell-stop at 1.1895 and a take-profit at 1.1848 (last week low).
- Add a stop-loss at 1.1950.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.1955 and a take-profit at 1.2053 (38.2% retracement).
- Add a stop-loss at 1.1900.
The EUR/USD retreated slightly during the overnight session as investors reacted to Jerome Powell’s testimony to Congress. The pair declined to 1.1920, which was slightly lower than Tuesday’s high of 1.1953.
Powell Dovish Tone
Jay Powell sounded dovish in his testimony to lawmakers on Tuesday. In his opening remarks, the Fed chair said that the bank was committed to supporting the economy for as long as was required.
This was his first appearance since the Fed delivered a relatively hawkish decision last week. In it, the members decided to leave interest rates and quantitative easing intact. But they also boosted their forward outlook of the economy and sent signals that the bank will start hiking rates in 2023.
In his comments, Powell said that the country will unlikely for the country’s inflation to rise to the highest levels since the 1970s. He also reiterated that inflation has been relatively higher than what the Fed expected.
The EUR/USD also reacted to the relatively strong housing data from the US. According to the National Association of Realtors, existing-home sales declined by 0.9% between April and May. The sales decline to a seasonally adjusted rate of 5.8 million. This decline was mostly because there were not enough homes in the market. As a result, house prices have surged, with the median price rising by 23.6% year on year. The US will publish the latest new home sales numbers on Wednesday. Analysts expect the sales rose from 863k in April to 870k in May.
The EUR/USD will also react to the latest Services and Manufacturing PMI numbers from Europe and the US. In the US, the two PMIs are expected to ease to 70.0 and 61.5, respectively. In the Eurozone, analysts expect the data to show that two PMIs held steady at 62.1 and 57.8, respectively.
EUR/USD Analysis
The EUR/USD declined to a multi-month low of 1.1845 last week after the FOMC decision. The pair has made some modest recovery this week and is up by 0.65% from its lowest level last week. It is at the same level as the 61.8% Fibonacci retracement level on the four-hour chart. Still, it is below the 25-day and 50-day moving averages, signaling that bears are still in control. Therefore, the pair will likely resume the downward trend as bears attempt to move below last week’s low.
