Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1400.
Add a stop-loss at 1.1640.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1637.
Add a stop-loss at 1.1400.
The EUR/USD exchange rate rose for the second consecutive day as traders waited for the upcoming Federal Reserve and European Central Bank (ECB) interest rate decisions. It rose to 1.1540 on Wednesday morning, up modestly from this week's low of 1.1407.
Fed and ECB Interest Rate Decision
The EUR/USD pair rose slightly as traders focused on the upcoming Federal Reserve and ECB interest rate decision, which will happen on Wednesday and Thursday, respectively.
Economists and traders on key platforms like Kalshi and Polymarket predict that the Fed will leave interest rates unchanged in the upcoming meeting as the US moves towards stagflation.
Stagflation is a situation characterized by high inflation and slow economic growth. The ongoing Iran war will fuel inflation as crude oil, natural gas, fertilizer, and shipping costs surge. A report coming later today is expected to show that the core producer price index (PPI) rose to 3.7% in February from 3.6% in January.
Also, a recent report showed that the economy shed over 92,000 jobs in February, while the unemployment rate rose to 4.4%.
The European Central Bank is also expected to leave rates unchanged at 2.15% as it contends with the impact of war that has pushed energy prices much higher this month.
This war will undo the recent progress the bank has made in terms of inflation. A report expected later on Wednesday is expected to show that the headline Consumer Price Index rose to 1.9% in February, while the core CPI rose to 2.4%.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD exchange rate has pulled back in the past few weeks. It dropped from the year-to-date high of 1.2085 on January 27 to a low of 1.1407 on Monday.
The pair bounced back in the next two consecutive days and is currently at its highest level since Friday last week. A closer look shows that the 50-day and 100-day Exponential Moving Averages (EMA) are about to have a bearish crossover.
The pair remains below the Ichimoku cloud indicator and is slightly below the 23.6% Fibonacci Retracement level at 1.1637.
Therefore, the pair will likely resume the downward trend in the coming days, and possibly retest the year-to-date low of 1.1400.
On the flip side, a move above the key resistance level at 1.1637 will invalidate the bearish outlook.