Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1450.
- Add a stop-loss at 1.1650.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1650.
- Add a stop-loss at 1.1450.
The EUR/USD exchange rate continued its strong downward trend this week. It dropped for three consecutive days, reaching a low of 1.1545, down from the year-to-date high of 1.2080.
European Economic Concerns Remain
The EUR/USD pair has remained under pressure in the past few months, moving from a high of 1.2080 to the current 1.1545. This retreat happened as concerns about the European economy continued amid his rising energy prices.
Data shows that Brent and the West Texas Intermediate (WTI) surged to $97 and $93, respectively, even after the IEA decided to release millions of barrels of oil. The member states will release over 400 millions barrels, with the US releasing over 172 million barrels.
Oil prices continued rising as investors anticipated that the release will not replace the loss at the Strait of Hormuz. Also, it jumped as Iraq, a top oil exporter, announced that it would stop port operations at its oil ports after two tankers were targeted.
Europe is more exposed to the ongoing crisis in the Middle East as it has limited natural resources. It has also limited energy imports from Russia after the start of the war in Ukraine.
Analysts believe that the ongoing energy prices surge will push European inflation to over 3% in the coming months as Iran believes that it has leverage. In a statement on Wednesday, the country reiterated that its goal is to have oil prices surge to $200 in the near term.
The EUR/USD pair will next react mildly to the upcoming US jobless claims data, which comes out on Thursday and the personal consumption expenditure (PCE) report. While the PCE report is important, the impact will be limited as US inflation will continue rising in the near term.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD pair has crashed in the past few months, moving from a high of 1.2081 in January to the current 1.1552. It has dropped below the ascending trendline that connects the lowest swings since July last year.
The pair has dropped below the 50-day Exponential Moving Average, while the Supertrend indicator remains in the red. The Relative Strength Index (RSI) and the MACD have continued falling. Therefore, the pair will likely continue falling as sellers target the next key target at 1.1450.