Bearish view
- Sell the EUR/USD pair and retest the support at 1.0800.
- Add a stop-loss at 1.1050.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1050.
- Add a stop-loss at 1.0800.
The EUR/USD exchange rate continued its strong surge this week, reaching a high of 1.0945, its highest level since October. It has jumped by over 7.5% from its lowest point this year as the focus shifted to the upcoming FOMC decision.
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FOMC interest rate decision
The EUR/USD pair continued its strong rally after the US published encouraging economic data. Numbers showed that the country’s housing starts rebounded to 1.5 million in February from 1.35 million a month earlier.
The number of building permits retreated by 1.2% in February to 1.45 million, missing the estimated 1.45 million. These numbers mean that the housing sector did relatively well ahead of Donald Trump’s tariffs.
Another report showed that the US import and export price index rose in February. These numbers came as the Fed started its two-day meeting, culminating in the interest rate decision later on Wednesday.
Economists expect the Fed to maintain interest rates steady in this meeting. As such, the main rate decision will not significantly impact the US dollar. Instead, the quarterly dot plot will be the main catalyst.
A dot plot is a document that estimates the future interest rate cuts. The most recent plot pointed to two rate cuts later this year. With the stock market falling and recession odds rising, there is a likelihood that officials will point to more cuts in this meeting.
Recession odds have risen after Donald Trump implemented large tariffs on imported goods from the top trading partners like Canada, Mexico, and China. He hopes to add more reciprocal tariffs in April.
The other EUR/USD news will be the upcoming European consumer inflation data. Economists expect the data to show that the headline CPI dropped from 2.5% in January to 2.4% in February, while the core CPI fell from 2.7% to 2.6%.
EUR/USD technical analysis
The EUR/USD exchange rate has been in an uptrend after bottoming in February. Its 100-day and 50-day Weighted Moving Averages have made a bullish crossover, a highly bullish sign.
The Awesome Oscillator has moved above the zero line, while the Stochastic Oscillator has moved above the overbought level. Also, the Average Directional Index (ADX) has jumped to 31, its highest level since January. The ADX is a popular indicator used to measure a trend’s strength.
Therefore, while the pair may hit the resistance level at 1.1000, there is a likelihood that it will pull back since it has become overbought. If this happens, it may retest the support at 1.0800.
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