Bullish view
Buy the EUR/USD pair and set a take-profit at 1.2000.
Add a stop-loss at 1.1640.
Timeline: 1-2 days.
Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1640.
Add a stop-loss at 1.2000.
The EUR/USD exchange rate continued its strong rally, reaching its highest point since February 27 this year as crude oil prices dropped amid renewed peace push. It has jumped by over 3% from the year-to-date low ahead of key statements by senior Federal Reserve and European Central Bank officials.
Euro Gains Momentum as Risk-On Sentiment Prevails
The EUR/USD pair continued rising as crude oil prices plunged, with Brent and West Texas Intermediate (WTI) falling to $95 and $92, respectively.
These prices dropped even after the US started its blockade of the Strait of Hormuz, which has prevented shipments of Iranian oil.
The hope among investors is that the two sides will meet again and attempt to reach an agreement before the two-week ceasefire ends. Such a deal would likely lead to oil flowing from the Gulf region, which would lower energy prices and raise the possibility of Federal Reserve interest rate cuts.
The next important catalysts for the EUR/USD pair will be the upcoming statements by senior central bank officials from the Federal Reserve and the European Central (ECB).
The most senior one will be ECB’s Christine Lagarde. In her statement on Tuesday, she said that the Iran war had affected the European economy, with its growth falling below the baseline.
Still, she maintained that the bank was still studying the situation and had not made its decision on whether to cut interest rates. Economists expect the bank to leave interest rates unchanged when it meets later this month.
In the United States, Michele Bowman and Michael Barr will talk and provide hints on what to expect this year. The bank will also release the Beige Book, which provides details on the US economic growth by regions.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has been in a strong rally in the past few days. It has jumped in the last seven consecutive days, a sign that it may have bottomed.
The pair has risen above the key resistance level at 1.1640, the neckline of the double-bottom pattern at 1.1450. It has jumped above the 50-day Exponential Moving Average (EMA), while the Relative Strength Index and the Stochastic Oscillator have continued rising.
Therefore, the pair will keep rising, with the next key target being at the psychological level at 1.2000. A move above that level will point to more gains, potentially to the year-to-date high of 1.2085.