EUR/USD Forex Signal: Reversal Likely Ahead of Consumer Confidence Data

The main catalyst for the EUR/USD pair in the past few weeks has been the performance of the banking sector following the collapse of several banks. 

Bearish view

  • Sell the EUR/USD pair and set a take-profit at 1.0650.
  • Add a stop-loss at 1.0850.
  • Timeline: 1-02 days.

Bullish view

  • Set a buy-stop at 1.0800 and a take-profit at 1.0900.
  • Add a stop-loss at 1.0700.

The EUR/USD price was a bit flat on Tuesday morning as concerns of the banking sector eased and after the relatively strong German business sentiment data. It rose to a high of 1.0786 during the Asian session as traders waited for the upcoming US consumer confidence data.

Banking sector woes ease

The main catalyst for the EUR/USD pair in the past few weeks has been the performance of the banking sector following the collapse of several banks. This week, there is a sense that the situation in the industry is stabilizing.

On Monday, most banking stocks jumped after Citizens Bank agreed to acquire Silicon Valley Bank, in a transaction overseen by the FDIC. Deutsche Bank, whose Credit Default Swaps (CDS) jumped on Friday, saw its stock jump by over 1% on Monday. And in the US, the Dow Jones, S&P 500, and Nasdaq 100 rose by over 0.50%.

The EUR/USD pair reacted to the relatively strong economic numbers from Germany. Data by the Ifo Institute showed that business expectations improved from 88.4 in February to 91.2 in March, higher than the expected 88.3. The business climate index rose from 91.1 to 93.3, signaling that the corporate sector in the country was doing well.

The key mover for the pair will be a statement by Christine Lagarde, the head of the European Central Bank (ECB). In it, she will likely maintain her hawkish tone and point out that the bank will continue its tightening process.

The other notable event will be the latest consumer confidence data from the United States. Economists expect that confidence among consumers dropped from 102.9 to 101 as inflation remained at an elevated level. This figure will come a few days after the Fed decided to hike interest rates by 0.25%.

EUR/USD technical analysis

The EURUSD pair drifted upwards slightly as concerns in the banking sector eased. It managed to move slightly above the key support at 1.0760, the highest point on March 15. It has also moved between the 25-period and 50-period moving averages while the Relative Strength Index (RSI) has moved slightly above the neutral point at 50.

The pair has also formed a bearish flag point, signaling that it will likely have a bearish breakout, with the next reference level being at 1.0650.


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Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.