Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1410.
Add a stop-loss at 1.1700.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1700.
Add a stop-loss at 1.1410.
The EUR/USD pair rose by over 80 basis points as the US dollar index retreated amid hopes that the ongoing Iran war was about to end. It jumped to 1.1560, a few points above last month’s low of 1.1412.
US Dollar Retreats Amid Risk-On Sentiment
The EUR/USD pair rose slightly as the US dollar retreated, as signs emerged that the US war against Iran was about to end. This optimism rose after media reports showed that Trump was considering abandoning the war and leaving other countries to handle the Strait of Hormuz closure.
As a result, investors embraced a risk-on sentiment, with the Dow Jones Index rising by over 1,000 points. The other top indices like the S&P 500 and Nasdaq 100 also surged, while the VIX Index dropped by double digits.
Looking ahead, the EUR/USD pair will react to the upcoming European and US manufacturing PMI numbers, which will shed more color on the state of the economy as the war continues.
The other key data will be the upcoming ADP private payrolls report. Economists expect the upcoming report to show that the economy added 40k jobs in March from the previous 63k. This report will come two days before the US releases the official non-farm payrolls data.
The EUR/USD pair will also react to the upcoming US retail sales data, which will provide more information about the economy and the health of the American consumer.
Economists polled by Reuters expect the report to show that retail sales rose by 0.5% in February, which will translate to an annual growth rate of 2.9%.
These numbers will help the Federal Reserve determine what to do later this month. Most analysts believe that the bank will leave interest rates unchanged as the economy goes through a stagflation.
EUR/USD Technical Analysis
The EUR/USD pair has been in a freefall in the past two months, moving from a high of 1.2090 in January to a low of 1.1445 on Tuesday. It then rebounded to a high of 1.1560, forming a bullish engulfing pattern, a common reversal sign.
Still, the pair remains below the lower side of the bearish flag pattern, a common continuation sign in technical analysis. It also remains below the 50-day Exponential Moving Average (EMA) and the Supertrend indicator.
The pair will likely resume the downward trend in the coming days as investors assess the progress on the ongoing Iran war. The initial target will be at 1.1412, its lowest level this year.