Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0778.
- Add a stop-loss 1.065.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 1.0685 and a take-profit at 1.0600.
- Add a stop-loss at 1.0750.
The EUR/USD price retreated slightly after a series of mixed economic data from Europe and the United States. It pulled back to a low of 1.0700 after it jumped to a high of 1.077 last week. The pair will likely remain muted this week as trader focus on last week’s data and the passage of the debt ceiling deal.
Muted week expected
The focus among investors recently was the debt ceiling debacle in the US as divisions between Democrats and Republicans continued. Since a US default was in no ones interest, the two parties decided to reach a compromise. The challenge of all this is that the country’s spending binge will continue, pushing its deby upwards by over $4 trillion in the next few years.
In the near term, however, the fears of a default ended, providing some relief to the market. Meanwhile, the newly appointed Federal Reserve vice chair said that he will support pausing rate hikes in the coming meeting. As such, there is a likelihood that the Fed will decide to hit a strategic pause in its meeting this month.
The challenge is that the labor market is still strong, as evidenced by last Friday’s non-farm payroll (NFP) data. According to the Bureau of Labor Statistics (BLS), the economy added over 339k jobs in May while the unemployment rate rose slightly to 3.7%. Wage growth held steady, making the battle against inflation much difficult.
Meanwhile, data published by the Eurostat showed that the bloc’s consumer inflation continued falling last month. It dropped to 6.1%, the lowest level since Russia invaded Ukraine in 2022. The decline happened as natural gas prices remained at the lowest level since 2021.
Looking ahead, there will be no major economic data from Europe and the US this week. The only vital numbers will be the latest European and US services PMI numbers and the EU GDP numbers scheduled for Thursday.
EUR/USD technical forecast
The EUR/USD pair jumped to 1.07783 on Friday and then quickly pulled back after the latest non-farm payrolls (NFP) data. On the 4H chart, the pair retreated after it entered the Ichimoku cloud. It has now moved below this cloud and the 50-period moving average.
As it retreated, the pair retested the descending trendline shown in green. Therefore, since this seems like a break and retest pattern, there is a likelihood that it will bounce back this week.
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