Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1485.
Add a stop-loss at 1.725.
Timeline: 1-3 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1725.
Add a stop-loss at 1.1485.
The EUR/USD pair continued its strong bearish breakout this month as consumer and inflation continues rising. It dropped to 1.1625, its lowest level since April 8, as traders wait for the upcoming Federal Reserve minutes of the last meeting. It has formed a head-and-shoulders pattern, pointing to more downside.
Top Regulated Brokers
FOMC to Publish Minutes of the Last Meeting
The EUR/USD pair continued its strong downward trend as inflation continued surging. Data released last week revealed that the headline consumer inflation continued rising this month. The headline CPI rose to 3.8%, while the core CPI jumped to 6%, the fastest growth rate in four years.
These numbers mean that the Federal Reserve will not cut interest rates this year. Instead, analysts anticipate that the bank may even decide to hike rates next year. Indeed, data reveals that the US bond yields continued rising, with the ten-year rising to 4.60%. The 30-year yield jumped to over 5%.
The next important catalyst for the EUR/USD pair will be the upcoming Federal Reserve minutes on Wednesday. These minutes will provide more color on the last meeting and what officials expect to happen this year. In that meeting, the bank left rates unchanged between 3.50% and 3.75%.
The EUR/USD pair will also react to the upcoming European Central Bank (ECB) minutes. The bank decided to leave rates unchanged and signaled that it may hike in the upcoming meeting in June this year.
Additionally, the pair will react to any new developments on the ongoing US-Iran war, which is now in a quagmire. In a statement last week, Trump noted that he may be forced to launch another attack to force Iran to reach an agreement. Such a move would lead to higher energy prices and inflation in the near term.
EUR/USD Technical Analysis
The daily chart reveals that the EUR/USD pair has continued falling in the past few days. It has plunged from a high of 1.1850 in April to the current 1.1625.
A closer look shows that the pair has formed a large head-and-shoulders pattern, a common bearish reversal sign in technical analysis. It has moved below the 50-day moving average as the Relative Strength Index (RSI) has pulled back.
Therefore, the pair will likely continue falling in the near term, potentially to the neckline at 1.1483. A move below that level will point to more downside, potentially to 1.1400.