Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0650.
- Add a stop-loss at 1.0800.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0735 and a take-profit at 1.0800.
- Add a stop-loss at 1.0650.
The EUR/USD exchange rate drifted upwards after the Federal Reserve decision, US private payrolls, JOLTs job openings, and manufacturing numbers. It rebounded to a high of 1.0725, higher than this week’s low of 1.0650.
Federal Reserve decision
The US published mixed economic numbers on Wednesday. According to ADP, the private sector created over 192k jobs in April, a higher figure than the median estimate of 179k. The figure was also lower than March’s estimate of 208k.
Meanwhile, the number of job vacancies in the US dropped to 8.48 million, lower than the estimated 8.68 million. That was the lowest figure in months and is a sign that the labor market is softening.
These numbers came two days before the Bureau of Labor Statistics (BLS) publishes the official nonfarm payrolls (NFP) data. Economists expect the numbers to show that the jobless rates remained at 3.8% in April as the economy created over 200k jobs.
The EUR/USD pair also rose after the Federal Reserve delivered its interest rate decision. As was expected, the bank decided to leave interest rates unchanged between 5.25% and 5.50%.
The bank will also start to reduce the size of its quantitative tightening (QT) program in June. The Fed noted that the economy was still solid, helped by strong consumer spending. However, a report by the ISM showed that the manufacturing PMI dropped from 51.4 to 49.1 in April, lower than the expected 50.2.
Also, Jerome Powell noted that it was seeing a lack of further progress that inflation was falling. The most recent data showed that the headline Consumer Price Index (CPI) rose to 3.5% in March while the Personal Consumption Expenditure (PCE) rose to 2.5%.
EUR/USD technical analysis
The EUR/USD pair bottomed at 1.0650 on Wednesday and bounced back after the Federal Reserve decision. On the 4H chart, the pair moved back to the rising wedge pattern that is shown in purple.
The exchange rate has moved above the Ichimoku cloud indicator. It has also risen above the 50 and 25-period Exponential Moving Averages (EMA). At the same time, the Relative Strength Index (RSI) has pointed upwards while the Average Directional Index (ADX) has dropped to its lowest point this year.
Therefore, the outlook for the pair is still bearish, with the next reference point to watch being this week’s low of 1.0650. The stop-loss of this trade will be at 1.0800.
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