Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0900.
- Add a stop-loss at 1.0800.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0835 and a take-profit at 1.0785.
- Add a stop-loss at 1.0925.
The EUR/USD exchange rate was flat on Monday morning in a low-volume environment since the US markets will be closed. The pair was trading at 1.0846, a few pips above last week’s low of 1.0800.
The US Memorial Holiday continues
Monday will see muted market action because of the US Memorial Day event and the lack of important data from Europe. The only report to watch will come from Germany, where officials will release the latest business confidence data.
Economists expect the data to show some improvements, with the current assessment rising from 88.9 to 89.9. The German business expectation and IFO business climate are expected to improve to 90.5 and 90.3, respectively.
These numbers will confirm the view that the German economy is showing signs of improvement. On Thursday, a report by S&P Global revealed that the manufacturing PMI improved from 42.5 in April to 45.4 in May. The improvement was better than the median estimate of 43.4.
There are no important European economic numbers this week. Most analysts believe that the European Central Bank (ECB) will deliver its first interest rate cut in June. What is unclear is whether the bank will deliver more cuts later this year.
The only key event from the United States will be a statement by John Williams of the New York Federal Reserve. In his recent statements, Williams has warned that there was no need to slash interest rates since inflation remains stubbornly high. The most recent data showed that the headline CPI slowed to 3.4% in May.
This week's most important report will be the Personal Consumption Expenditure (PCE) figure set for Friday. This is an important inflation figure because it looks at a bigger shopping basket in rural and urban areas.
EUR/USD technical analysis
The EUR/USD exchange rate pulled back after nearing the psychological level of 1.0900 on May 16th. It pulled back to the key support level at 1.0800 on Friday and then bounced back to 1.0850. It has also jumped above the 50-day Exponential Moving Average (EMA) and the 61.8% Fibonacci Retracement level.
The pair has also retested the first support of the Andrew’s pitchfork tool while the two lines of the MACD indicator have formed a bullish crossover pattern. Therefore, the pair will likely remain in this range in a low-volume environment on Monday.
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