Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1412
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 1.1412.
The EUR/USD exchange rate pulled back slightly even after Christine Lagarde opened doors for interest rate hikes by the European Central Bank (ECB). It was trading at 1.1560, a few points below this week's high of 1.1630.
Lagarde Points to Rate Hikes
The EUR/USD pair remained under pressure after Lagarde, the head of the European Central Bank (ECB), hinted that she might be forced to hike interest rates if inflation jumps as energy prices in Europe soars.
She also hinted that the bank will hike even if the inflation jump will not be persistent. In its last meeting, officials predicted that headline inflation will average 2.6% this year, 2% in 2027, and 2% in 2028. The bank had already achieved its inflation target of 2.0% before the war started.
The statement came a day after a report by S&P Global showed that business activity in Europe dipped in March as the war started. This report showed that the composite PMI dropped to a ten-month low in March.
The EUR/USD pair will also react to the new developments in the Middle East, where President Donald Trump is aiming to de-escalate. The US has sent Iran a list of 15 point plans to end the war, while Iran has sent a list of five.
Iran has also said that it was not interested in talks because it believes that it is winning. Also, Iran believes that Trump’s calls for talks are aimed at giving the US time for its military to arrive.
The next key catalysts for the EUR/USD to watch will be the US jobless claims data and statements by key Fed officials like Stephen Miran, Philip Jefferson, and Michael Barr.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD pair has retreated from the year-to-date high of 1.2082 in January to the current 1.1556. It has moved below the 50-day Exponential Moving Average (EMA), which has provided a dynamic resistance.
The pair has formed an ascending channel, which is part of the bearish flag pattern in technical analysis. It remains below the Supertrend indicator, a sign that bears remain in control.
Therefore, the pair will likely have a bearish breakout, potentially to the next key target being the year-to-date low of 1.1412. On the other hand, a move above the 50-day moving average will invalidate the bearish outlook.