Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1600.
- Add a stop-loss at 1.1735.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1735.
- Add a stop-loss at 1.1600.
The EUR/USD pair rose slightly as the market reflected on the impact of the latest lawsuit against Jerome Powell and the upcoming macro data and events from the United States. It was trading at 1.1670, a few points above this month’s low of 1.1616.
Federal Reserve Independence and Key Macro Events
The EUR/USD pair rose as Jerome Powell, the head of the Federal Reserve, faces a criminal investigation over the $2.5 billion refurbishment of the bank’s headquarters.
The potential lawsuit alleges that Powell lied to Congress about the ongoing construction, which has been $700 million over budget. It is the first time that a Fed Chair has faced a criminal charge. Also, it comes at a time when President Donald Trump has pushed the bank to cut interest rates to boost the economy.
Looking ahead, the EUR/USD exchange rate will have some major catalysts in the coming days. The first major catalyst will come out on Tuesday when the Bureau of Labor Statistics publishes the latest consumer inflation report.
This report will come a few days after the agency released soft jobs data, which showed that the economy added 50k jobs in December as the unemployment rate dropped to 4.4%.
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The upcoming inflation report will have a minor impact on the Federal Reserve as most analysts expect it to leave interest rates unchanged in its meeting this month. JPMorgan analysts expect the bank to leave rates unchanged this year and then hike next year.
The other key data to watch will be the upcoming Producer Price Index (PPI) and US retail sales, which will come out on Wednesday this week
Meanwhile, the Supreme Court will deliver its ruling on Donald Trump's tariffs this week. If the court rules against the levies, the administration will have more legal ways to impose those tariffs on most countries.
EUR/USD Technical Analysis
The EUR/USD exchange rate has been in a strong downward trend in the past few weeks, moving from a high of 1.1805 on December 22nd to the current 1.1672.
It has moved below the 50-day Exponential Moving Average (EMA). Also, the pair has formed a head-and-shoulders pattern, a common bearish reversal chart pattern.
The Supertrend indicator has turned red for the first time since October last year. Therefore, the pair will likely resume falling as sellers target the key support level at 1.1600.
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